July 3rd, 2025: Weekly Market Review

1. The U.S. stock market, led by the S&P 500 and Nasdaq, hit record highs by June 27, 2025, fueled by easing trade tensions and optimism for Federal Reserve rate cuts. 

The S&P 500 closed at 6,173.07, rebounding from a $4 trillion April loss triggered by Trump’s “Liberation Day” tariff announcement, with a 90-day tariff pause and trade deals with China, the UK, and Vietnam spurring a rally—S&P 500 up 3.44% and Nasdaq 4.25% in late June. Expectations of two to three rate cuts in 2025, potentially lowering the federal funds rate to 4%, boosted valuations, while the Leading Economic Index (LEI) reportedly shifted from -4% to +4% in May, driven by stock price gains and durable goods orders (up 16.4%), signaling a potential economic upturn despite weaker manufacturing and consumer sentiment.

However, the LEI’s slight 0.1% decline in May to 99.0, after a 1.4% drop in April, highlights ongoing challenges, including consumer pessimism and rising unemployment claims. Strong corporate earnings, particularly in tech and industrials, and de-escalating geopolitical tensions, like Middle East conflicts, have supported the market’s surge. Yet, high tariffs at 15% threaten margins and consumer spending (up 1.2% in Q1 2025), with the Fed holding rates at 4.25–4.50% amid 2.7% core PCE inflation. While the LEI’s reported +4% shift lacks direct confirmation, the market’s highs reflect confidence in trade stabilization and monetary easing, though sustained growth depends on managing tariff impacts and economic resilience.  Click onto picture below to access video.  REF: SchwabNetwork

2. The Federal Housing Finance Agency (FHFA), led by William J. Pulte, directed Fannie Mae and Freddie Mac, which back nearly half of the $12 trillion U.S. mortgage market, to develop proposals for including cryptocurrency holdings in single-family mortgage loan risk assessments. 

Effective immediately, the directive allows cryptocurrencies held on U.S.-regulated centralized exchanges to be considered assets without conversion to U.S. dollars, supporting President Trump’s goal of making the U.S. the “crypto capital of the world.” This policy aims to better assess borrowers’ financial profiles, potentially broadening homeownership access for those with digital assets like Bitcoin, without requiring sales that trigger capital gains taxes.

The FHFA’s order mandates safeguards to address cryptocurrency volatility, requiring proposals to include risk mitigants like adjustments for market swings and adequate reserve ratios, limited to assets on compliant U.S. exchanges, excluding self-custody wallets. Fannie Mae and Freddie Mac must submit plans for board approval before FHFA review, ensuring oversight. While industry leaders like Michael Saylor praise this as a milestone for crypto adoption, critics warn of risks, including insufficient research and potential housing bubble concerns. This directive, though not final, marks a bold step toward modernizing mortgage underwriting, with success hinging on balancing innovation and financial stability. Click onto picture below to access video.  REF: WSJ, ARK-Invest, CNBC

3. The ongoing economic and technological war between the U.S. and China, characterized by escalating tariffs, export controls, and restrictions like the U.S. CHIPS Act and China’s retaliatory measures, has disrupted global supply chains, prompting a rerouting of trade flows that benefits Asia excluding China. 

As U.S. tariffs on Chinese goods, which hit 126.5% before a partial rollback to 51.1% in May 2025, continue to strain China’s manufacturing (PMI at 48.3, signaling contraction), countries like India, Vietnam, and Taiwan are emerging as alternative manufacturing hubs, with India’s PMI hitting a 14-month high of 61.0 in June 2025 and Vietnam attracting firms like Foxconn for electronics production. These nations offer lower labor costs, favorable trade policies, and proximity to existing Asian supply chains, making them attractive for companies diversifying away from China. Investing in Asia ex-China, particularly in ETFs like the iShares MSCI Emerging Markets ex-China ETF (EMXC) or country-specific funds for India (INDA), capitalizes on this shift, as goods from these regions find their way to the U.S. and global markets, driven by resilient consumer demand and trade agreements like the U.S.-Taiwan Initiative on 21st-Century Trade, despite risks from global economic slowdowns and regional competition.

• The iShares MSCI Emerging Markets ex China ETF (ticker: EMXC) seeks to track the investment results of an index composed of large- and mid-capitalization emerging market equities, excluding China.  REF: EMXC_website, Factsheet, Prospectus

• The iShares MSCI India ETF seeks to track the investment results of an index composed of Indian equities.  REF: INDA_website, Factsheet, Prospectus

REF: Stockcharts

NOTE: Not investment advice or recommendations. Investor should consider the investment objective, risks, charges and expenses carefully before investing.  For additional information about securities mentioned above or in the video, please visit the companies’ websites of referenced securities mentioned above.  Read carefully before investing.

With the current macro-economic backdrop, below are areas we currently favor:

• Fixed Income – Short-term Corporates (Low-Beta)
• Fixed Income – Corporates High Yield as Opportunistic Allocation (Low-Beta)
• Businesses that contribute to and benefit from AI & Automation (Market-Risk)
• Cyber-Security & Software (Market-Risk)
• Fintech & Financials (Market-Risk)
• Digital Asset – Bitcoin (Market-Risk/Hedge)
• Cloud Computing (Market-Risk)
• Biotechnology (Market-Risk)

4. World Watch

4A. Recent geopolitical and economic shifts have significantly challenged China’s global influence, exposing weaknesses in its strategic alliances and economic dominance. 

Iran’s defeat by the U.S. and Israel in June 2025 has weakened China’s Middle East leverage, as 90% of Iran’s oil exports supply only 10% of China’s oil needs, limiting Beijing’s support amid reliance on Gulf suppliers like Saudi Arabia. The Taliban’s cancellation of a 25-year oil deal, citing unmet promises and substandard technology, further erodes the Belt and Road Initiative’s credibility, already strained by reduced investments in Iran and regional skepticism. These ally defections underscore China’s struggle to maintain influence, with a potential Strait of Hormuz closure threatening half its oil imports. Beijing’s planned 2025 military parade aims to project strength, but it may not fully counter these diplomatic setbacks.

Meanwhile, escalating EU-China trade tensions and India’s manufacturing surge highlight China’s economic vulnerabilities. The EU’s sanctions on Chinese electric vehicles (up to 45% tariffs), timber, and medical equipment, coupled with accusations of insincere negotiations, have halted high-level trade talks. China’s rare earth export restrictions risk further alienating partners. Concurrently, India’s PMI of 61, driven by electronics exports and Apple’s production shift, challenges China’s supply chain dominance. ASEAN’s caution toward Chinese goods reflects a broader de-risking trend. These developments—ally losses, trade disputes, and India’s rise—signal a shifting global landscape, with China facing growing diplomatic and economic pressures despite efforts to assert resilience.  Click onto picture below to access video by Don Xiang, an expert analyst focused on China developments.  REF: DonXiang, WoodCentral, TheDiplomaticInsight

4B. In June 2025, India’s Composite PMI soared to 61.0, a 14-month high, driven by robust growth in manufacturing and services, fueled by strong domestic demand and record export orders, per HSBC Flash PMI data. 

U.S. tariffs on Chinese goods, peaking at 126.5% before easing to 51.1% in May 2025, have weakened China’s manufacturing (PMI at 48.3, signaling contraction), redirecting global trade toward India. With exports like iPhones to the U.S. surging in March 2025, India’s consumer-led economy, less reliant on exports (20% of GDP) than China, has seized opportunities in electronics and pharmaceuticals. This shift highlights India’s growing role in global supply chains amid tariff-induced disruptions.

However, India’s PMI gains face risks from U.S.-China trade tensions and global economic uncertainty. While India benefits from moderate 27% U.S. tariffs (exempting pharmaceuticals), a global slowdown could hit IT services and other exports. China’s economic woes, including a property slump and deflation, intensify competition in markets like Southeast Asia. India’s manufacturing PMI of 57.6 in May 2025 outpaces China’s 48.5, but sustaining this edge requires policy support. The Reserve Bank of India’s rate cut to 6% in June 2025 aims to boost growth (projected at 6.3–6.8% for 2025–26), yet navigating trade volatility and global dynamics remains crucial for India’s continued economic ascent.  Click onto picture below to access video.  REF: HSBC, CNBC, REUTERS

4C. An updated snapshot of the current global state of economy.

According to TradingEconomics as of 6/30/2025 (REF: TradingEconomics):

• The US economy contracted at an annualized rate of 0.5% in Q1 2025, a sharper decline than the second estimate of a 0.2% drop and the first quarterly contraction in three years. 
• Germany’s annual consumer price inflation eased to 2.0% in June 2025, down from 2.1% in May and below market expectations of 2.2%, according to a preliminary estimate.
• The annual inflation rate in France rose to 0.9% in June 2025, defying forecasts that it would hold at May’s over four-year low of 0.7%, preliminary estimates showed.
• Italy’s annual consumer price inflation inched higher to 1.7% in June of 2025 from 1.6% in the previous month, in line with market expectations.

5. Quant & Technical Corner – A selection of quantitative & technical data we monitor on a regular basis to help gauge the overall financial market conditions and the investment environment.

5A. Most recent read on the Fear & Greed Index with data as of 7/1/2025 – 8:00PM-ET is 67 (Greed).  Last week’s data was 57 (Greed) (1-100).  CNNMoney’s Fear & Greed index looks at 7 indicators (Stock Price Momentum, Stock Price Strength, Stock Price Breadth, Put and Call Options, Junk Bond Demand, Market Volatility, and Safe Haven Demand).  Keep in mind this is a contrarian indicator!  REF: Fear&Greed via CNNMoney

5B. St. Louis Fed Financial Stress Index’s (STLFSI4) most recent read is at –0.6635 as of June 26, 2025.  Previous week’s data was -0.7856.  A big spike up from previous readings reflecting the turmoil in the banking sector back in 2023.  This weekly index is not seasonally adjusted.  The STLFSI4 measures the degree of financial stress in the markets and is constructed from 18 weekly data series: seven interest rate series, six yield spreads and five other indicators. Each of these variables captures some aspect of financial stress. Accordingly, as the level of financial stress in the economy changes, the data series are likely to move together.  REF: St. Louis Fed

5C. University of Michigan, University of Michigan: Consumer Sentiment for February [UMCSENT] at 52.2, retrieved from FRED, Federal Reserve Bank of St. Louis, June 27, 2025.  Back in June 2022, Consumer Sentiment hit a low point going back to April 1980.  REF: UofM

5D. The Chicago Fed National Activity Index (CFNAI) increased to –0.28 in May from –0.36 in April. Two of the four broad categories of indicators used to construct the index increased from April, but three categories made negative contributions in May. The index’s three-month moving average, CFNAI-MA3, decreased to –0.16 in May from +0.06 in April. REF: ChicagoFed, May’s Report

5E. (6/20/2025) The Conference Board Leading Economic Index (LEI) for the US ticked down by 0.1% in May 2025 to 99.0 (2016=100), after declining by 1.4% in April (revised downward from –1.0% originally reported). The LEI has fallen by 2.7% in the six-month period ending May 2025, a much faster rate of decline than the 1.4% contraction over the previous six months. The composite economic indexes are the key elements in an analytic system designed to signal peaks and troughs in the business cycle. The indexes are constructed to summarize and reveal common turning points in the economy in a clearer and more convincing manner than any individual component. The CEI is highly correlated with real GDP. The LEI is a predictive variable that anticipates (or “leads”) turning points in the business cycle by around 7 months. Shaded areas denote recession periods or economic contractions. The dates above the shaded areas show the chronology of peaks and troughs in the business cycle. The ten components of The Conference Board Leading Economic Index® for the U.S. include: Average weekly hours in manufacturing; Average weekly initial claims for unemployment insurance; Manufacturers’ new orders for consumer goods and materials; ISM® Index of New Orders; Manufacturers’ new orders for nondefense capital goods excluding aircraft orders; Building permits for new private housing units; S&P 500® Index of Stock Prices; Leading Credit Index™; Interest rate spread (10-year Treasury bonds less federal funds rate); Average consumer expectations for business conditions.  REF: ConferenceBoard, LEI Report for May  (Released on 6/30/2025)

We have experienced a “rolling recession” since June 2022 and are only now emerging from it. However, authorities are not labeling it a recession due to high employment data.

5F. Probability of U.S. falling into Recession within 3 to 4 months is currently at 84.97% (with data as of 06/22/2025 – Next Report 07/07/2025) according to RecessionAlert Research.  Last release’s data was at 81.13%.  This report is updated every two weeks. REF: RecessionAlertResearch

5G. Yield Curve as of 6/30/2025 is showing Normal.  Spread on the 10-yr Treasury Yield (4.19%) minus yield on the 2-yr Treasury Yield (3.69%) is currently at 50bps.  REF: Stockcharts   The yield curve—specifically, the spread between the interest rates on the ten-year Treasury note and the three-month Treasury bill—is a valuable forecasting tool. It is simple to use and significantly outperforms other financial and macroeconomic indicators in predicting recessions two to six quarters ahead.  REF: NYFED

5H. Recent Yields in 10-Year Government Bonds.  REF: Source is from Bloomberg.com, dated 6/30/2025, rates shown below are as of 6/30/2025, subject to change.

The 10-Year US Treasury Yield… The 10-Year Yield is indirectly related to inflation. I expect the 10-Year Yield to drop further as dis-inflation kicks in.  REF: StockCharts1, StockCharts2

10-Year Real Interest Rate at 1.87166% as of 6/11/25.  Last month’s data was 1.66756%.  REF: REAINTRATREARAT10Y

ICE BofA US High Yield Index Option-Adjusted Spread (BAMLH0A0HYM2) currently at 3.02 as of June 30, 2025.  This is a key indicator of market sentiment, particularly regarding risk and economic health.  At its core, the spread reflects the extra return investors demand to hold riskier corporate debt over safer government securities. High-yield bonds are issued by companies with lower credit ratings (below investment grade, like BB or lower), meaning they carry a higher chance of default. The spread compensates for this risk. When the spread is narrow—say, around 2.5% to 3%, as seen recently—it suggests investors are confident, willing to accept less extra yield because they perceive lower default risk or a strong economy. Narrow spreads often align with bullish markets, where cash is flowing, growth is steady, and fear is low.   REF: FRED-BAMLH0A0HYM2

5I. (6/30/2025) Today’s National Average 30-Year Fixed Mortgage Rate is 6.67% (All Time High was 8.03% on 10/19/23).   Last week’s data was 6.84%.  This rate is the average 30-year fixed mortgage rates from several different surveys including Mortgage News Daily (daily index), Freddie Mac (weekly survey), Mortgage Bankers Association (weekly survey) and FHFA (monthly survey).  REF: MortgageNewsDaily, Today’s Average Rate

The recent spike in the 30-year fixed-rate jumbo mortgage to 6.67%, compared to Freddie Mac’s rate at 6.77% and the Mortgage Bankers Association (MBA) rate at 6.88%, highlights key differences in the mortgage market. Jumbo mortgages, which exceed the conforming loan limits set by government agencies like Freddie Mac, typically carry higher interest rates because they are riskier for lenders. These loans are not backed by government entities, which increases the risk for lenders and, consequently, leads to higher rates. In contrast, Freddie Mac and MBA provide averages for conforming loans, which meet federal guidelines and have lower risk due to government backing, keeping their rates lower.

Housing Affordability Index for Apr = 101.0 // Mar = 103.2 // Feb = 102.2 // Jan = 100.7 // Dec = 100.7 // Nov = 99 // Oct = 102.3. Data provided by Yardeni Research.  REF: Yardeni

5J. Velocity of M2 Money Stock (M2V) with current read at 1.386 as of (Q1-2025 updated 6/26/2025).   Previous quarter’s data was 1.383.  The velocity of money is the frequency at which one unit of currency is used to purchase domestically- produced goods and services within a given time period. In other words, it is the number of times one dollar is spent to buy goods and services per unit of time. If the velocity of money is increasing, then more transactions are occurring between individuals in an economy.  Current Money Stock (M2) report can be viewed in the reference link.   REF: St.LouisFed-M2V

M2 consists of M1 plus (1) small-denomination time deposits (time deposits in amounts of less than $100,000) less IRA and Keogh balances at depository institutions; and (2) balances in retail MMFs less IRA and Keogh balances at MMFs. Seasonally adjusted M2 is constructed by summing savings deposits (before May 2020), small-denomination time deposits, and retail MMFs, each seasonally adjusted separately, and adding this result to seasonally adjusted M1. Board of Governors of the Federal Reserve System (US), M2 [M2SL], retrieved from FRED, Federal Reserve Bank of St. Louis; Updated on June 24, 2025.  REF: St.LouisFed-M2

Money Supply M0 in the United States decreased to 5,648,600 USD Million in May from 5,732,900 USD Million in April of 2025. Money Supply M0 in the United States averaged 1,194,572.77 USD Million from 1959 until 2025, reaching an all time high of 6,413,100.00 USD Million in December of 2021 and a record low of 48,400.00 USD Million in February of 1961.   REF: TradingEconomics, M0

5K. In May, the Consumer Price Index for All Urban Consumers rose 0.1 percent, seasonally adjusted, and rose 2.4 percent over the last 12 months, not seasonally adjusted. The index for all items less food and energy increased 0.1 percent in May (SA); up 2.8 percent over the year. (NSA). June 2025 CPI data are scheduled to be released on July 15, 2025, at 8:30AM-ET.  REF: BLS, BLS.GOV

 5L. Technical Analysis of the S&P500 Index.  Click onto reference links below for images.

• Short-term Chart: Trend Bullish on 6/30/2025 – REF: Short-term S&P500 Chart by Marc Slavin (Click Here to Access Chart)

• Medium-term Chart: Trend Bearish to Bullish on 6/30/2025 – REF: Medium-term S&P500 Chart by Marc Slavin (Click Here to Access Chart)

• Market Timing Indicators – S&P500 Index as of 6/30/2025 – REF: S&P500 Charts (7 of them) by Joanne Klein’s Top 7 (Click Here to Access Updated Charts)

• The S&P500 is hitting all-time-high, rebounding from a V-shaped recovery.  REF: Stockcharts

• S&P500 and CBOE Volatility Index (VIX) as of 6/30/2025.  REF: FRED, Today’s Print

5M. Most recent read on the Crypto Fear & Greed Index with data as of 6/30/2025 is 47 (Neutral).  Last week’s data was 53 (Neutral) (1-100).  Fear & Greed Index – A Contrarian Data.  The crypto market behavior is very emotional. People tend to get greedy when the market is rising which results in FOMO (Fear of missing out). Also, people often sell their coins in irrational reaction of seeing red numbers. With the Crypto Fear and Greed Index, the data try to help save investors from their own emotional overreactions. There are two simple assumptions:

• Extreme fear can be a sign that investors are too worried. That could be a buying opportunity.
• When Investors are getting too greedy, that means the market is due for a correction.

Therefore, the program for this index analyzes the current sentiment of the Bitcoin market and crunch the numbers into a simple meter from 0 to 100. Zero means “Extreme Fear”, while 100 means “Extreme Greed”.  REF: Coinmarketcap.com, Today’sReading

Bitcoin – 10-Year & 2-Year Charts. REF: Stockcharts10Y, Stockcharts2Y