What We're Seeing and Watching

Monday, June 9, 2025

WHAT WE’RE SEEING…

Stock market: The closely watched employment and jobs report for the month of April showed the US economy to be maintaining its resilient (positive) tone, despite the

uncertainty surrounding the tariffs and congressional budget roadmaps. The Dow Jones Industrial Average was ahead by 1.3% for the week, closing at 42,763. The broader Standard & Poor’s 500 Index gained almost 1.5% for the week, closing just above 6,000. Stock market participants have a history of “liking” round numbers, so we see the 6,000 level on the S&P 500 as a positive sentiment factor. The Nasdaq Composite Index, which reflects the high-tech sector, was the strongest index, gaining 2.2% for the week, closing at 19,530.

Late last week, a war of words erupted between President Trump and Elon Musk. Shots were fired on each party’s social media account. So far, the dispute has captured everyone’s interest, but it seems to have had no discernable impact on the financial markets.

We’ve noticed an increasingly optimistic tone in the stock market. Market participants appear to be looking past all of the uncertainty coming from Washington DC, as well as a few signs that our economic growth is slowing. Decades of experience tell us that investor sentiment can change as quickly as the weather in Texas. Sound investment management principles require that we avoid extremes of either optimism or pessimism. “Buying with both hands” or “dumping all your stocks” is almost always unwise. The stock market has been enjoying a strong surge over the recent weeks, and our clients’ portfolios have benefited. On the other hand, by most historical measures, the stock market is richly valued, and CNN’s Fear and Greed Index points to greed as the current controlling emotion. We continue to be “risk aware” investment advisers, and as such, we are maintaining our current slightly defensive asset allocations.

We continue to be mindful of the adage that financial market reactions often happen slowly, then all at once.

Interest rates: Interest rates edged up a bit last week. The yield on the two-year US Treasury note advanced from 3.9% to 4.04%, and the yield on the 10-year US Treasury note advanced from 4.4% to 4.5%. Our preferred money market fund yield retreated a bit to 3.92%. We continue to see orderly conditions in the bond market. These orderly conditions suggest investors are not overly worried about the US government’s debt, deficit and inflation situation. Nevertheless, we continue to be mindful of the adage that financial market reactions often happen slowly, then all at once. The bond market will always be on our radar screen.

Gold and Oil: Gold had a quiet week, closing at $3,331 per ounce. Oil prices popped higher by almost $4 per barrel, closing at $64.73 per barrel. We continue to monitor commodity trends closely as another facet of our risk management process.

Random but interesting: All the talk about the federal debt and deficit is couched in terms of trillions of dollars. Here’s a random but interesting fact to help us grasp the almost unimaginable concept of a trillion: 1 million seconds ago was 11 days ago. 1 billion seconds ago was 1994 (31 years ago). 1 trillion seconds ago was 31,000 B.C.

WHAT WE’RE WATCHING…

Next week, investors will be watching the monthly reports on inflation from the US Department of Labor. We will see the Consumer Price Index (“CPI”) and the Producer Price Index (“PPI”) for May. Economists will be analyzing the data, looking for evidence of the effect of President Trump’s tariffs on inflation. These inflation reports are scrutinized by the Federal Reserve, as they decide on the level and direction of interest rates. Stock market investors are rooting for these reports to show inflation as being under control, which gives the FED leeway to lower interest rates. Low interest rates make it less expensive to borrow money, which can stimulate economic activity, driving corporate profits and stock prices higher.

LPL’s chief equity strategist, Jeff Buchbinder, recently summed up his summer 2025 outlook as follows: “We encourage long-term investors to watch for opportunities to add equities on dips, though periodic bouts of market volatility are to be expected until there is greater clarity on trade.”

We believe that the prudent strategy for this summer is to emphasize risk management slightly more than opportunity pursuit.

 Considering the complexity and uncertainty swirling around the economy, we agree with Jeff on the expectation for “periodic bouts of market volatility” this summer. We would part ways with him on “to add to equities on dips”. Staying the course with our asset allocation to equities has been the right call for our clients’ portfolios in this volatile year. We believe that the prudent strategy for this summer is to emphasize risk management slightly more than opportunity pursuit.

Please feel free to reach out with any questions, thoughts, or feedback. We always say feedback is the breakfast of champions. We sincerely appreciate your continued trust and confidence as we navigate these uncertain times.

A closing thought from the book of Proverbs in The Passion Translation (circa 2020): “When you humbly receive wise correction, it adorns your life with beauty and makes you a better person.” (25:12)

BRUCE ROBINSON, CFP

Managing Principle

(The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  All performance referenced is historical and is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.)