June 26th, 2025: Weekly Market Review

1. The economic calendar for this week revealed divergent U.S. housing market trends amid affordability challenges. 

Existing home sales increased 0.8% from April to a seasonally adjusted annualized rate of 4.03 million units in May 2025, recovering from a 0.5% drop and beating expectations of 3.96 million, per the National Association of Realtors, though high mortgage rates (6.86%) and a record median price ($422,800) kept sales 0.7% below last year. Conversely, new single-family home sales fell 13.7% to 623,000 units, erasing April’s 9.6% gain, driven by rising rates and higher material costs tied to tariff concerns, according to the U.S. Census Bureau and HUD. Key releases include Q2 GDP on Thursday, June 26, with the Atlanta Fed’s GDPNow forecasting 3.4% growth, and personal income and spending data on Friday, June 27, expected to show weaker consumer activity after January’s 0.5% consumption drop.

The expiration of tariffs in July 2025 adds uncertainty, with implications including: (1) higher construction costs if tariffs persist, pushing home prices up; (2) inflation from increased import costs, delaying rate cuts; (3) reduced consumer spending power, curbing housing demand; and (4) fluctuating builder confidence, as tariff relief could lower costs but renewed trade tensions may stall projects. These factors suggest cautious optimism for economic growth, with housing market challenges likely to persist.  REF: AtlantaFed, NAR, CensusBurea

2. On June 22, 2025, Tesla launched its long-awaited robotaxi service in Austin, Texas, marking its first foray into autonomous ride-hailing with a limited pilot of 10 to 20 Model Y vehicles operating in a geofenced area, primarily along South Congress Avenue. 

The invite-only service, priced at a flat $4.20 per ride, features vehicles equipped with Tesla’s latest Full Self-Driving (FSD) Unsupervised software, though human safety monitors remain in the passenger seat due to safety concerns and a pending Texas law requiring permits for driverless vehicles starting September 1. While Elon Musk hailed the launch as a milestone for Tesla’s AI-driven future, the rollout faced scrutiny from the National Highway Traffic Safety Administration (NHTSA) after videos showed robotaxis driving erratically, and Texas lawmakers urged a delay for safety reasons. The trial, competing with established players like Waymo, aims to scale up to thousands of vehicles, but its success hinges on addressing safety and regulatory challenges.

Waymo and Tesla pursue contrasting strategies in autonomous vehicle production, impacting their cost and scalability. Waymo’s robotaxi fleet, built on modified Jaguar I-PACE and Chrysler Pacifica vehicles, incurs costs exceeding $100,000 per unit due to expensive LIDAR, radar, and camera systems, plus complex integration. With production limited to about 1,500 vehicles annually through third-party manufacturers like Jaguar and Hyundai, and plans for 2,000 additional I-PACEs in 2025, Waymo struggles to scale for widespread ride-hailing across its planned 10 U.S. cities by 2025. Its shift toward vision-based systems aims to cut costs, but reliance on external partners and high per-unit expenses limits rapid expansion.

Tesla, however, leverages vertical integration for superior cost and scale advantages. Its Model Y, equipped with Full Self-Driving hardware, costs around $30,000 per vehicle, with the Cybercab expected to reach $20,000 through optimized autonomous design. Tesla’s production capacity exceeds 2 million vehicles annually, dwarfing Waymo’s output, with experts suggesting a potential 35,000-robotaxi fleet by 2026. By using a vision-only approach that eliminates LIDAR, Tesla can deploy a larger, cheaper fleet, positioning it to dominate the robotaxi market if its FSD software achieves unsupervised autonomy…  “Waymo just costs way-more…!” Brett Winton of ARK Invest.  Click onto pictures below to access videos.  REF: ARK-Invest, CBS, CNBC

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 investor relations section of the companies’ websites of referenced securities mentioned above.  Read carefully before investing.

3. In 2025, mid-cap and small-cap stocks have trailed large caps, with the S&P MidCap 400 and S&P SmallCap 600 falling 3.83% and 8.80% year-to-date through May, compared to a 2% decline in the Nifty 50, a large-cap proxy. 

High interest rates disproportionately impact smaller firms reliant on short-term, variable-rate loans, unlike large caps with fixed-rate debt (70% maturing post-2028). Weak global demand has hit export-heavy sectors like IT and industrials, critical for mid and small caps, while inflation has reduced consumer spending. Overvaluation, with mid-cap P/E ratios 58% above large caps, fueled a correction, worsened by foreign investor outflows and a shift to fixed-income assets. Over 70% of mid and small-cap stocks trading below their 200-day moving averages signal ongoing risk-off sentiment, favoring large caps’ liquidity.

The outlook for 2025 suggests volatility for mid and small caps, with uncertainties from potential tariff policy changes under the Trump administration adding risk. Proposed tariffs could disrupt global supply chains, raising costs for export-oriented small caps, though domestic-focused firms may benefit. Expected Federal Reserve rate cuts could ease borrowing pressures, supporting small caps’ projected 22% EPS growth versus 15% for large caps. Deregulation and M&A activity may boost small-cap IPOs, but tariff uncertainty could delay recovery until late 2025. Investors should focus on undervalued, quality stocks through active management.  REF: Morningstar

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 investor relations section of 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)
• Biotechnology (Market-Risk)
• Financials (Market-Risk)
• Digital Asset – Bitcoin (Market-Risk/Hedge)
• Cloud Computing (Market-Risk)

4. World Watch

4A. ​ At the NATO summit in The Hague on June 25, 2025, the 32 member nations agreed to increase defense spending to 5% of GDP by 2035, up from the 2% target, driven by U.S. demands and Russia’s aggression since its 2022 Ukraine invasion. 

The plan allocates 3.5% for core defense (troops, weapons) and 1.5% for cybersecurity and infrastructure, with aid to Ukraine counting toward the goal. Leaders reaffirmed their “ironclad” Article 5 commitment to collective defense, countering Russia’s 7.1% GDP defense spending in 2024, though the declaration avoided naming Russia to align with U.S. priorities. Some nations, like Spain, secured flexibility to spend less (e.g., 2.1%) to protect social budgets.

This spending hike could strain global economies, particularly in Europe, where high debt may force cuts to social programs or increased borrowing, potentially raising interest rates and inflation. Globally, redirecting $2 trillion annually by 2035 may limit investments in infrastructure or green energy, slowing growth. However, defense sector growth could drive jobs and innovation in countries like the U.S., while enhanced security may stabilize markets. A 2029 review will assess progress, but success depends on sustained political and economic commitment across diverse nations.  Click onto picture below to access video. REF: Bloomberg, The Hauge Smmit

4B. On June 17, 2025, Honda successfully tested an experimental reusable rocket in Taiki, Hokkaido, advancing its goal of suborbital spaceflight by 2029. 

This positions Honda in the booming commercial space industry, where over 100 companies are launching satellites into low Earth orbit (LEO) to meet demand for broadband, Earth observation, and connected mobility. SpaceX leads with over 7,600 Starlink satellites, followed by Amazon’s Project Kuiper with 54 satellites toward a 3,200-satellite constellation. Other players include OneWeb, Rocket Lab, Blue Origin, China’s Galactic Energy, and Japan’s Interstellar Technologies, backed by Toyota. Japan’s government aims to double its space industry to $55 billion by the early 2030s, supporting startups like Innovative Space Carrier. Honda’s entry, leveraging combustion and control expertise, intensifies competition in satellite deployment.

The rise of reusable rockets, like Honda’s prototype and SpaceX’s Falcon 9, lowers launch costs, enabling affordable satellite deployments for global internet, climate monitoring, and connected vehicles. Amazon’s Kuiper, competing with Starlink, partners with ULA and Arianespace to build its network. However, with over 60,000 satellites projected by 2030, concerns about space congestion and collision risks grow, as noted on X. Honda’s rocket, though experimental, could support small satellite launches, potentially enhancing its automotive connectivity. This competitive, innovative landscape demands regulation to manage orbital overcrowding sustainably. Click onto picture below to access video.  REF: Space.com, REUTERS

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

According to TradingEconomics as of 6/23/2025 (REF: TradingEconomics):

• apan’s annual inflation rate edged down to 3.5% in May 2025 from 3.6% in the previous two months, marking the lowest level since November. 
• The annual inflation rate in the UK edged down to 3.4% in May 2025 from 3.5% in April, matching expectations.
• The Central Bank of Brazil hiked its Selic rate by 25bps to 15% at its June meeting, citing persistent inflation and unanchored expectations.
• The Netherlands’ GDP expanded by 0.4% quarter-on-quarter in Q1 2025, revised up from an initial estimate of 0.1%, but slightly slower than the upwardly revised 0.5% growth recorded in Q4.

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 6/23/2025 – 8:00PM-ET is 57 (Greed).  Last week’s data was 61 (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 –0.7856 as of June 19, 2025.  Previous week’s data was -0.8111.  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, May 30, 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) decreased to –0.25 in April from +0.03 in March. Three of the four broad categories of indicators used to construct the index decreased from March, and three categories made negative contributions in April. The index’s three-month moving average, CFNAI-MA3, was unchanged at +0.05 in April. REF: ChicagoFed, April’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 April  (Released on 5/31/2025)

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 6/23/2025 is showing Normal.  Spread on the 10-yr Treasury Yield (4.34%) minus yield on the 2-yr Treasury Yield (3.85%) is currently at 49bps.  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 6/23/2025, rates shown below are as of 6/23/2025, 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 3.13 as of June 23, 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. (6/23/2025) Today’s National Average 30-Year Fixed Mortgage Rate is 6.84% (All Time High was 8.03% on 10/19/23).   Last week’s data was 6.91%.  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 6.84%, compared to Freddie Mac’s rate at 6.81% and the Mortgage Bankers Association (MBA) rate at 6.84%, 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 1.387 as of (Q1-2025 updated 5/29/2025).   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 May 27, 2025.  REF: St.LouisFed-M2

Money Supply M0 in the United States decreased to 5,732,900 USD Million in April from 5,775,200 USD Million in March of 2025. Money Supply M0 in the United States averaged 1,188,977.26 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 Less Bullish on 6/23/2025 – REF: Short-term S&P500 Chart by Marc Slavin (Click Here to Access Chart)

• Medium-term Chart: Trend Bearish to Rising on 6/23/2025 – REF: Medium-term S&P500 Chart by Marc Slavin (Click Here to Access Chart)

• Market Timing Indicators – S&P500 Index as of 6/23/2025 – REF: S&P500 Charts (7 of them) by Joanne Klein’s Top 7 (Click Here to Access Updated Charts)

• A well-defined uptrend channel shown in green with S&P500 broke away from the uptrend.  REF: Stockcharts

• S&P500 and CBOE Volatility Index (VIX) as of 6/23/2025.  REF: FRED, Today’s Print

5M. Most recent read on the Crypto Fear & Greed Index with data as of 6/23/2025 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