Weekly Market Update: June 23, 2025
The Federal Reserve held the federal funds rate steady, at 4.25%-4.50%, during the June monetary policy meeting. Although price growth continues to moderate, the labor market is holding up fairly well, and the Federal Open Market Committee (FOMC) would like to see more data showing the rate of inflation approaching the central bank’s target rate of 2% before resuming rate cuts. The recent escalation of geopolitical tensions, exacerbated by the war between Israel and Iran and the Trump Administration’s increased trade tariffs, gives monetary policymakers some pause.
The conflict in The Middle East is concerning. Israel’s military actions to prevent Iran from producing nuclear weapons and the retaliatory attacks by Iran bear watching, as the conflict could threaten the production and transportation of oil and the near-term health of the global economy. The International Monetary Fund (IMF) had already lowered its forecast for global growth prior to the war between Israel and Iran and the latest developments may put more pressure on the world’s economies. From a domestic perspective, higher energy prices may slow the progress recently made on the inflation front.
Wall Street also is monitoring the budget debate on Capitol Hill. There are concerns that the proposed legislation, including the Senate’s recently unveiled version, will not cut spending enough to slow the nation’s ballooning debt levels. However, a failure to produce a new budget bill could hurt the gross domestic product (GDP), which contracted during the first quarter.
Meanwhile, second-quarter earnings season is fast approaching. The consensus forecast is calling for average profit growth of around 5% for the S&P 500 companies. If this mid-single-digit pace is realized, it would mark the slowest growth rate for theIndex since the final quarter of 2023. This could make further gains for stocks more difficult with the major equity averages recently trading not too far removed from their all-time highs.
Conclusion: Stocks continue to climb the proverbial “wall of worry,” which now includes an ongoing war in the oil-rich Middle East region. Given this backdrop, we continue to recommend maintaining a portfolio consisting mostly of stocks of high-quality companies with reliable cash flows and cash-equivalent securities.
Source: ValueLine.com
