Weekly Commentary (6/16/25) Markets Drift Lower
Markets slipped last week as investors weighed better-than-expected U.S. inflation data against escalating geopolitical risks and unresolved trade policy. Growth concerns outside the U.S. also re-emerged, with global economic forecasts weakening.
For the week, the DJIA declined 1.30%, the S&P 500 fell 0.36%, and the NASDAQ dropped 0.61%. Small-cap equities also tumbled, with the Russell 2000 down 1.45%. Developed international stocks, as measured by the MSCI EAFE, slipped 0.17%, while the MSCI EM gained 0.75%. Bond prices advanced as yields fell, with the Bloomberg Aggregate up 0.67% and the 10-Year Treasury yield declining 10 basis points to 4.41%. Commodities spiked - gold rose 3.27% to $2,431.20/oz, and oil jumped 8.40% to $72.98/barrel, driven by renewed Middle East tensions.
After a string of stubborn inflation data earlier this year, both the Consumer Price Index (CPI) and Producer Price Index (PPI) surprised to the downside in May. Core CPI rose just 0.1% for the month and 2.8% year-over-year, while core PPI posted a similarly mild increase. These reports buoyed hopes for Federal Reserve rate cuts later this year and provided support for fixed income markets.
However, geopolitical headlines tempered investor optimism. Late in the week, Israel launched airstrikes targeting Iranian military and nuclear assets. While most of Iran’s retaliatory drone activity was intercepted, the flare-up injected uncertainty into commodity and equity markets. Oil surged on fears of supply disruption, which—if sustained—could reverse some of the recent disinflationary trends. Historically, higher oil prices act as a “stagflationary” force: raising inflation while dampening economic activity.
On the trade front, negotiations between U.S. and Chinese officials produced modest progress, with commitments to ease select export controls. However, tariff levels remain elevated and unresolved. Analysts remain split on how impactful current and proposed tariffs will be to real income and GDP—though recent commentary from Goldman Sachs suggests the damage may be less severe than originally feared.
Globally, there are renewed signs of divergence. The World Bank trimmed its global growth forecast to 2.3% for 2025, citing weakness in Europe and Asia. In contrast, U.S. data continues to reflect relative strength. Last week’s consumer sentiment reading rose to 60.5, and homebuilder confidence climbed modestly. Treasury auctions were well received, and the budget deficit came in smaller than expected.
This week, attention turns to Fed Chair Powell’s testimony before the House Financial Services Committee and the release of PCE inflation data—the Fed’s preferred metric. Also on the economic reports docket are durable goods orders, PMIs, and consumer confidence.
We continue to emphasize the importance of patience, discipline, and proper diversification in the face of complex crosscurrents.
“Patience and fortitude conquer all things.” – Ralph Waldo Emerson