Weekly Market Update: June 9, 2025

The inflation outlook continues to improve. The Personal Consumption Expenditures (PCE) Price Index, the assessment of inflation most closely tracked by the Federal Reserve, showed further progress in April. Both the PCE and the core PCE, which excludes the food and energy components, rose just 0.1% on a month-to-month basis. From a one-year perspective, the PCE and core PCE came in better than expected, with prices increasing 2.1% and 2.5%, respectively. The headline figure is just modestly above the Fed’s target growth rate of 2.0%. 

The global trade situation remains unsettled. The U.S. Court of International Trade recently ruled that President Trump’s sweeping reciprocal tariffs were illegal, a move that could block much of his administration’s global trade policies. However, the Trump Administration quickly obtained a stay from the CAFC (U.S. Court of Appeals for the Federal Circuit), and the global trade changes were left in place pending further court proceedings. 

The House of Representatives’ budget bill is being reviewed by the Senate. Additional spending cuts will likely be needed for the Republican majority to pass the bill and send it back to the House for another review of the proposed legislation. The Trump Administration is touting the bill, which includes sizable tax cuts and slashes to regulations in the energy and financial sectors, as a key to boosting economic growth. The uncertain fiscal policies have Fed officials proceeding cautiously on the interest-rate front, with only a few reductions expected this year. 

The economy appears to be in “bend but don’t break” mode. The gross domestic product (GDP) fell slightly in the March quarter, the first contraction in more than three years. However, with inflation moderating and the labor market holding up relatively well, the fears of a recession remain at bay while investors await further global trade developments.

Conclusion: As the month of June commenced, the major equity averages had recovered ground lost in the early April tariff selloff. However, until the market gets some clarity on the fiscal and monetary policy fronts, some volatility can’t be ruled out. In this environment, we continue to recommend a portfolio led by stocks of high-quality companies with reliable cash flows and cash equivalent securities. 

Source: ValueLine.com