Monthly Market Update - June 2025

June is here, followed by a month of growing concerns around global growth, inflation, and the impact of tariffs. Over the past few weeks, recent policy moves have created an increasingly volatile geopolitical landscape. The U.S. administration announced a temporary 90-day reduction to tariffs on Chinese goods, lowering rates from 145% to 30%, while China also cut taxes on U.S. exports from 125% to 10%.

Though the job market moved at a healthy pace in previous months this year, experts anticipate the labor market momentum to downshift as tariff shock impacts the U.S. and global economy. It is estimated that job growth will decline from 160,000 per month in 2024 to around 90,000 in 2025, while the decline in net immigration flows will constrain labor supply impacts. 

The Consumer Price Index also increased 2.3% in April 2025, and on a monthly basis, increased by 0.2%. It will likely take time to see the full price impacts that tariffs will have on consumer spending. If inflation rises, the Federal Reserve may be inclined to raise rates to combat it. However, it is doubtful that will be feasible given the slowing economy. 

If you have any questions, concerns, or are looking for guidance given the uncertainty in the economy, please reach out. We wish you a happy start to the summer season. Stay safe!

Stocks

April showers brought May flowers in the equity market as major indices rose precipitously, sending the S&P 500, Dow Jones, and NASDAQ into positive territory for the year following the strong gains in May. Equity performance was buoyed in part by a series of trade policy moves that reduced the tariff rates across several countries. This unwound the negative sentiment from earlier in the year around unfavorable trade policy for markets. Equities were also bolstered by the continuation of strong earnings and resilient underlying economic data, which further reinforced the idea of no meaningful slowdown in domestic conditions. While volatility persisted throughout the month, equity prices remained driven by headlines. Fortunately, most headlines in May were positive, helping lift markets, most notably the NASDAQ, which gained nearly 10% during the month.

Sector Performance

Ten of the eleven sectors posted gains in May, with seven now having turned positive for the year. Sectors sensitive to economic growth, such as Technology and Consumer Discretionary, led the rally on the back of continued strong economic data and the optimism that reduced tariffs would lead to stronger consumer demand. Strong earnings reports from large tech companies, like Nvidia, helped lift the broader market and suggested that companies have been able to weather existing tariffs and mitigate their impact on earnings and margins. The only negative sector for the month was healthcare, as earnings struggled and regulatory pressure on firms like UnitedHealth spooked investors. 

Bonds

Fixed income assets declined in May as interest rates rose in response to higher forecasts of economic growth, which would require fewer interest rate cuts to stabilize the economy. The inverse relationship between interest rates and bond prices led to a subsequent decline in bond prices, although they remain positive for the year. The 2-year Treasury yield rose 29.3 basis points, and the 10-year yield rose 24.4 basis points. Contributing to the move, the Federal Reserve signaled it would maintain current policy rates until there is clear evidence of inflation sustainably returning to its 2% target. This cautious stance reinforced the higher-for-longer narrative that pressured bond markets during the month. 

Economic Update

Despite initial tariffs being applied to the economy, there were few signs of economic strain, especially as most of the measures were temporarily rolled back to allow time for negotiation. Inflation continued to ease, with the Personal Consumption Expenditures Price Index (PCE) falling to 2.1%, just above the Fed’s 2% target, while core PCE, which excludes the volatile food and energy segments, remained elevated at 2.8%. Economic growth remained resilient, with the economy adding an additional 177,000 jobs, and the unemployment rate remaining steady at 4.2%. Economic growth was also revised upward to -0.2%, a modest improvement over earlier estimates. The decline is attributed to a rise in imports stemming from a tariff-related trade imbalance, rather than weakening domestic demand. Sentiment improved alongside rising equity prices and a stable labor market. 

Drone Tree-Seeding Initiative Could 'Revolutionize' the Expansion of Rainforests 

Rainforests have a rich biodiversity containing nearly half of Earth’s existing plant and animal species, and produce twenty percent of the world’s oxygen. However, they are facing significant challenges due to deforestation, climate change, and other human impacts. As concerns continue to grow, new initiatives have begun around the world in an attempt to save the rainforest environments.  

A pioneering drone seed initiative has set out in south-west England, using one of the largest drones to use native tree seeds to date, and has the potential to transform how we view rainforest restoration. The project, led by Woodland Trust, has sent forth high-tech drones scattering 75,000 seeds across the Bodmin landscape in Cornwall. The drones weigh 110kg and can carry up to 58kg of seeds, while accessing areas of land where planting trees by hand is nearly impossible. Teaming up with the Southwest Rainforest Alliance, the Woodland Trust has a goal to triple the land area of temperate rainforest across Cornwall and Devon from 8% to 24% by 2050. 

By scattering tree seeds native to these rainforests, including common oak, alder, wild cherry, and downy birch, the drones were able to successfully seed 11 hectares of land in eight hours. According to Sam Manning, project officer for southwest rainforests at the Woodland Trust, restoring and expanding our temperate rainforests could prove vital in tackling the climate and biodiversity crises. The goal is to develop innovative ways to reach inaccessible sites that are unsafe for human tree planters, or where soil is too thin to allow planting with spades at a quicker and cheaper rate. 

Merlin Hanbury-Tenison, author of Our Oaken Bones, a book exploring rainforests, owns part of the land where the seeding has taken place. He stated, “If we’re to reverse this destruction, then we will need to leverage innovative technology-enabled solutions wherever possible. I cannot think of a better example of this than the drone seeding project that the Woodland Trust has embarked on in the Cabilla Valley”. To learn more about this exciting initiative and progress towards saving our rainforests, read the full article here. 

THOUGHT FOR THE MONTH

^{Index Definitions}

^{Dow Jones Industrial Average:The Dow Jones Industrial Average® (The Dow®), is a price-weighted measure of 30 U.S. blue-chip companies. The index covers all industries except transportation and utilities.}

^{Dow Jones U.S. Real Estate Total Return Index:The index is designed to track the performance of real estate investment trusts (REIT) and other companies that invest directly or indirectly in real estate through development, management, or ownership, including property agencies.}

^{NASDAQ Composite:The NASDAQ Composite is a market-cap weighted index of all issues listed on the Nasdaq stock exchange. It is heavily weighted towards the technology sector.} 

^{S&P 500 Bond Index:The S&P 500® Bond Index is designed to be a corporate-bond counterpart to the S&P 500, which is widely regarded as the best single gauge of large-cap U.S. equities. Market value-weighted, the index seeks to measure the performance of U.S. corporate debt issued by constituents in the iconic S&P 500.}

^{S&P 500 Consumer Discretionary:The S&P 500® Consumer Discretionary comprises those companies included in the S&P 500 that are classified as members of the GICS® consumer discretionary sector.}

^{S&P 500 Consumer Staples:The S&P 500® Consumer Staples comprises those companies included in the S&P 500 that are classified as members of the GICS® consumer staples sector.}

^{S&P 500 Energy:The S&P 500® Energy comprises those companies included in the S&P 500 that are classified as members of the GICS® energy sector.}

^{S&P 500 Financials:The S&P 500® Financials comprises those companies included in the S&P 500 that are classified as members of the GICS® financials sector.}

^{S&P 500 Index:The S&P 500® index is a market-cap weighted index of the largest 500 companies headquartered in the United States. The index covers approximately 80% of available market capitalization.}

^{S&P 500 Utilities:The S&P 500® Utilities comprises those companies included in the S&P 500 that are classified as members of the GICS® utilities sector.}

^{S&P U.S. Aggregate Bond Index:The S&P U.S. Aggregate Bond Index is designed to measure the performance of publicly issued U.S. dollar denominated investment-grade debt. The index is part of the S&P AggregateTM Bond Index family and includes U.S. treasuries, quasi-governments, corporates, taxable municipal bonds, foreign agency, supranational, federal agency, and non-U.S. debentures, covered bonds, and residential mortgage pass-throughs.}

^{S&P U.S. Treasury Bond Index:The S&P U.S. Treasury Bond Index is a broad, comprehensive, market-value weighted index that seeks to measure the performance of the U.S. Treasury Bond market.}

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