June 6th, 2025: Weekly Market Review

1. As of May 2025, the Federal Reserve, under Jerome Powell, maintains U.S. interest rates at 4.25%–4.5%, despite the Bank of England’s plans to cut rates from 4.5% and the Eurozone’s lower rates at 3.25%. 

I urge the Fed to restart lowering interest rates due to unsustainable economic pressures: annual interest payments exceeding $1 trillion strain federal and private budgets, businesses face over $1 trillion in loans needing rollovers that require lower capital costs, and sectors like real estate desperately need cheaper borrowing to survive. While Powell cites tariff-induced inflation risks from President Trump’s 10% import tariffs and up to 145% on Chinese goods, which could drive inflation beyond the current 2.8% (2.6% core), the Fed’s caution risks choking economic growth. Unlike the BOE, which faces less trade uncertainty and lower inflation (2.3%), the Fed must act to alleviate these financial burdens before they destabilize the economy.

The U.S. economy’s strength, with 2.5% GDP growth in 2024 and 4.1% unemployment, described by Powell as “strong overall,” reduces the urgency for cuts, but this resilience masks vulnerabilities in debt-heavy sectors. The Fed’s dual mandate—balancing price stability and employment—is complicated by potential tariff-driven stagflation, unlike the BOE’s simpler inflation focus. However, sustaining high rates risks exacerbating the $1 trillion interest payment burden, hindering businesses’ ability to refinance $1 trillion in loans, and threatening real estate operators’ and developers’ survival. Powell’s “wait for clarity” approach, citing low costs of delay, overlooks these mounting pressures. The Fed must lower rates to align with global trends and prevent economic strain from overwhelming critical sectors, prioritizing relief over prolonged caution.  REF: FOMC

Companies (Sectors) most at risk if interest rates continue to stay high:

• Commercial Real Estate (CRE) Companies
• Highly Leveraged Corporations (i.e. Collateralized Loan Obligations – CLOs)
• Cyclical and Consumer-Facing Sectors (Retailers & Restaurants)

2. South Korea has emerged as a global leader in nuclear power plant construction, consistently delivering projects on time and within budget, in stark contrast to the delays and cost overruns plaguing European and U.S. efforts. 

The country’s success is exemplified by its $20 billion contract to build the Barakah nuclear power plant in the United Arab Emirates, completed between 2012 and 2024 with four APR-1400 reactors at a refined cost of $24.4 billion, roughly on schedule despite minor delays. This achievement, coupled with a recent $17 billion deal to construct reactors in the Czech Republic, underscores South Korea’s ability to execute complex projects efficiently. The formula for this success lies in standardized designs, such as the APR-1400, which streamline construction and reduce costs through economies of scale, alongside a robust supply chain led by companies like Korea Hydro & Nuclear Power (KHNP) and Doosan Enerbility. South Korea’s nuclear ecosystem, supported by government backing and a track record of building 13 domestic reactors in an average of 56 months, enables it to outpace competitors like France and the U.S., where projects like Hinkley Point C and Vogtle have faced significant delays and cost escalations.

The implications of South Korea’s dominance are profound, as experts study its model to address global energy demands and carbon reduction goals. The country’s approach—emphasizing modular construction, rigorous project management, and a skilled workforce—has set a benchmark for efficiency, with construction costs as low as $2,000-$3,000/kW compared to $5,000-$10,000/kW in Western projects. Battery storage, while critical for renewables, is less relevant here, as nuclear provides stable baseload power, though South Korea’s small modular reactor (SMR) developments could integrate with future grid-stabilizing technologies. By securing contracts in the Middle East and Eastern Europe, South Korea not only boosts its economy but also positions itself as a key player in the global nuclear renaissance, with ambitions to export 10 reactors by 2030. Its proven ability to deliver reliable, cost-effective nuclear power makes it a model for nations seeking sustainable energy solutions, challenging larger economies to rethink their approaches to nuclear project management. Click onto picture below to access video.  REF: Bloomberg

3. Nuclear power holds immense potential to meet global energy demands with a reliable, low-carbon baseload source, offering significant upside as nations pursue net-zero goals and energy security. 

South Korea’s leadership in efficient nuclear plant construction, exemplified by projects like the UAE’s Barakah plant, underscores the sector’s growth, with its standardized designs and cost-effective execution driving global demand. The Global X Uranium ETF (URA), with 79% non-U.S. exposure and over 14% allocated to South Korean firms like Kepco Engineering & Construction, provides U.S. investors a strategic avenue to capitalize on this nuclear renaissance. URA’s focus on uranium mining and nuclear energy companies, including South Korea’s supply chain leaders, positions it to benefit from rising nuclear investments, projected to grow with $500 billion in global energy spending in 2024. While battery storage supports renewable integration, nuclear’s stable output reduces reliance on such systems, enhancing grid reliability.  REF: URA Factsheet, Holdings, URA-Documents

NOTE: Not investment advice or recommendations. Investor should consider the investment objective, risks, charges and expenses carefully before investing.  For prospectus or summary prospectus with information about this fund/ETF, please visit referenced links listed 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. ​ To meet urgent energy demands, adding electricity quickly and efficiently requires evaluating options like solar, wind, gas-powered plants, nuclear, and coal based on energy conversion efficiency and deployment speed. 

Solar power excels in speed, with small-scale farms (1-5 MW) deployable in 3-6 months and rooftop systems in days, driven by modular designs and costs dropping significantly over the past decade. Its efficiency, at 15-22% for converting sunlight, is moderate, and intermittency requires battery storage to stabilize grid supply, adding costs but ensuring consistent power. Gas-powered plants, with 50-60% efficiency in combined-cycle systems, provide reliable power and can be built in 1-2 years using existing infrastructure. Wind, nuclear, and coal are slower, taking 6 months to 10 years, and face challenges like land use, high costs, or emissions.

Solar power is the quickest option for grid expansion, especially in sunny regions, with costs among the lowest for new installations. Its scalability and low operational costs are enhanced by battery systems, which store excess energy to smooth fluctuations and ensure grid stability during peak demand or low sunlight. Gas plants, while efficient and dispatchable, rely on finite fuel and face environmental concerns. Batteries are critical for solar’s reliability, mitigating intermittency and supporting grid resilience, making solar the best choice for adding electricity now. Gas remains a strong alternative for immediate baseload needs where reliability is paramount.  Click onto picture below to access video.  REF: IEA-Solar, DOE

4B. Ukraine’s drone attack on Russian air bases, as reported by The Wall Street Journal, signals a new era in warfare, demonstrating drones’ effectiveness in precise, long-range strikes. 

The “Spiderweb” operation used low-cost FPV drones, costing as little as $400, to hit 41 strategic bombers, potentially disabling a third of Russia’s nuclear-capable fleet. Compared to traditional armies, drones are more efficient in asymmetric warfare, requiring fewer resources and bypassing defenses through low-altitude swarm tactics. Their psychological impact forces enemies to adapt, though drones cannot hold territory or match artillery’s firepower, making them a complementary tool.

A potential peace between Ukraine and Russia could reduce casualties and economic strain, with talks like those in Istanbul showing limited progress. However, Russia’s demands for territorial concessions and disarmament, against Ukraine’s drone-driven leverage, suggest peace might weaken Ukraine’s defenses. Ukraine’s strikes, disrupting 10% of Russia’s refining capacity, pressure Moscow, but unresolved issues risk a temporary ceasefire rather than lasting resolution, as both nations advance drone warfare technologies.  Click onto picture below to access video. REF: WSJ

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

According to TradingEconomics as of 6/2/2025,  REF: TradingEconomics :

• The US economy contracted at an annualized rate of 0.2% in Q1 2025, a slight improvement from the initial estimate of a 0.3% decline, but still marked the first quarterly GDP contraction in three years. 
• Italy’s annual consumer price inflation eased to 1.7% in May 2025, down from 1.9% in both March and April, according to preliminary data.
• The Brazilian gross domestic product expanded by 1.4% from the previous quarter in the first three months of 2025, the most in three quarters, and in line with market expectations.
• The unemployment rate in Brazil was at 6.6% in the three months ending to April 2025, edging marginally higher from the 6.5% on the January quarter, and well below market expectations of 6.9.

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 6/2/2025 – 8:00PM-ET is 62 (Greed).  Last week’s data was 65 (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 –0.5089 as of May 29, 2025.  Previous week’s data was -0.9036.  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. (5/19/2025) The Conference Board Leading Economic Index (LEI) for the US fell sharply by 1.0% in April 2025 to 99.4 (2016=100), after declining by 0.8% in March (revised downward from the –0.7% originally reported). The LEI declined by 2.0% in the six-month period ending April 2025, the same rate of decline as over the previous six months (April–October 2024). 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 81.13% (with data as of 05/31/2025 – Next Report 06/12/2025) according to RecessionAlert Research.  Last release’s data was at 74.4%.  This report is updated every two weeks. REF: RecessionAlertResearch

5G. Yield Curve as of 6/2/2025 is showing Normal.  Spread on the 10-yr Treasury Yield (4.42%) minus yield on the 2-yr Treasury Yield (3.93%) 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 6/2/2025, rates shown below are as of 6/2/2025, 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 1.66756% as of 5/13/25.  Last month’s data was 1.66841%.  REF: REAINTRATREARAT10Y

ICE BofA US High Yield Index Option-Adjusted Spread (BAMLH0A0HYM2) currently at 3.32 as of June 2, 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. (6/2/2025) Today’s National Average 30-Year Fixed Mortgage Rate is 6.96% (All Time High was 8.03% on 10/19/23).   Last week’s data was 6.92%.  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 6.96%, compared to Freddie Mac’s rate at 6.89% and the Mortgage Bankers Association (MBA) rate at 6.92%, 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.

(5/13/25) Housing Affordability Index for 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 April, the Consumer Price Index for All Urban Consumers rose 0.2 percent, seasonally adjusted, and rose 2.3 percent over the last 12 months, not seasonally adjusted. The index for all items less food and energy increased 0.2 percent in April (SA); up 2.8 percent over the year (NSA). May 2025 CPI data are scheduled to be released on June 11, 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 Bearish to Bullish on 6/2/2025 – REF: Short-term S&P500 Chart by Marc Slavin (Click Here to Access Chart)

• Medium-term Chart: Trend Bearish to Rising on 6/2/2025 – REF: Medium-term S&P500 Chart by Marc Slavin (Click Here to Access Chart)

• Market Timing Indicators – S&P500 Index as of 6/2/2025 – 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 6/2/2025.  REF: FRED, Today’s Print

5M. Most recent read on the Crypto Fear & Greed Index with data as of 6/2/2025 is 58 (Neutral).  Last week’s data was 68 (Greed) (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