weekly Market Update: June 30, 2025
The Federal Reserve took a slightly more hawkish stance at its June Federal Open Market Committee (FOMC) meeting. That included a continued pause on the interest-rate front, holding the federal funds rate in the range of 4.25% to 4.50%, even with recent data showing a slowdown in the pace of price growth at both the consumer and producer levels. The central bank wants more time to assess the impact of global affairs, including the developments in The Middle East and the Trump trade tariffs on the domestic economy. That said...
The possibility of two interest-rate reductions in the second half of the year remains on the table. This would help bring the benchmark short term interest rate a bit closer to a neutral level, and loosen the restrictive monetary policies in place. Interest-rate normalization is the process of returning interest rates to their normal levels, which are based on average inflation expectations over a long period of time.
The ongoing developments in The Middle East have taken a positive turn. After the United States completed a targeted aerial strike in Iran, said to cripple the nation’s nuclear weapons capabilities, President Trump was able to broker a delicate ceasefire deal between Israel and a militarily compromised Iran. Thus far, the truce has reduced concerns about a major disruption to global oil supplies. The price of crude oil fell sharply in response, which may prove to be a positive development on the inflation front.
Lower oil prices would also be good news for the U.S. consumer, as reduced energy costs make it less expensive to operate a home and run automobiles. This would likely free up more funds for discretionary purchases. However, The Conference Board reported that the Consumer Confidence Index declined in June, erasing some of the gain recorded in May.
Conclusion: Stocks rallied anew on reports of a ceasefire deal between Israel and Iran. The continued buying has the major equity averages approaching their all-time highs. Given this backdrop and the fragile nature of dealings in The Middle East, we continue to recommend maintaining a diversified portfolio, with an emphasis on the stocks of high-quality companies, as well as cash-equivalent securities.
Source: ValueLine.com
