To The Moon

On Fri, 27 Jun 2025, Wall Street extended its rally, sending S&P 500 and Nasdaq to all-time highs, for the first time since February 2025 & December 2024, respectively.

Trade deal hopes fueled investor risk appetite and economic data helped solidify expectations for rate cuts from US central bank.

If the rally momentum continues into Mon, 30 Jun 2025, then the 3 major indexes are on track to post big gains in June 2025, for the 2nd consecutive month.

For the week: (see above)

• DJIA: +3.89% (+1,640.72 to 43,819.27). The Dow remained -2.7% below its 04 Dec 2024’s peak.

• S&P 500: +3.41% (+203.40 to 6,173.07). The S&P posted 35 new 52-week highs and 6 new lows.

• Nasdaq: +4.66% (+846.45 to 20,273.46). Recorded 101 new highs and 68 new lows.

Trading volume on US exchanges was (finally !) higher at 22.07 billion shares versus the 18.27 billion average for the full session over last 20 trading days.

Short Trading Week.

It will be a 4-day trading this coming week because US public holiday, Independence Day falls on Fri, 04 Jul 2025. (see above)

US economic reports will continue to be released from Monday, as planned.

Economic Reports.

Jobs reports will take centrestage with the last inflation report (Personal consumption expenditure (PCE), out last Fri, 27 Jun 2025. (more on that later…)

• Tue, 01 Jul 2025 - S&P US manufacturing PMI (final).

• Tue, 01 Jul 2025 - Jobs opening & Labour turnover surveys (JOLTs) for May 2024.

• Wed, 02 Jul 2025 - ADP non-farm jobs report (June 2025).

• Thu, 03 Jul 2025 - Non-farm payroll report (June 2025).

• Thu, 03 Jul 2025 - Weekly and continuing jobless claims.

Quarterly Earnings.

• There are companies reporting their earnings but nothing of curated interest (to me!).

Personal Consumption Expenditure.

• The last inflation report for May 2025 was out last Fri, 27 June 2025.

• Mild as it maybe, inflation is creeping back into the US economy, like it or not.

Headline inflation:

• Monthly - was 0.1% unchanged from April.

• Annual - rose to 2.3% vs April upwards revised 2.2% (from 2.1%).

Core inflation:

• Monthly - was 0.2% vs April 0.1%.

• Annual - rose to 2.7% vs April upwards revised 2.6% (from 2.5%).

  This is the number Fed watches. With May’s number revised higher, inflation has actually rear its ugly head, sooner than reported in last month’s core PCE report.

US Market - July 2025.

(1) The month of June.

Historically, June is considered one of the weaker months for US stock market.

Since 1950, the S&P 500’s average June return is roughly flat, about +0.1% gain, making it the 2nd weakest month, after September - the weakest.

There are exceptions:

• if May has been strong, June often sees continued momentum.

(2) The month of July.

In contrast, July has historically been one of the best months for US stocks.

Data show that July is the single best month for S&P 500 on average, with strong positive returns over many decades.

The period from late June thru early July also tends to show a modest positive bias, although this pattern is less consistently reliable than the overall July outperformance.

Reciprocal Tariff Expiry Nears.

Amidst ‘euphoric’ historical performance of US market in July, is the return of Trump’s reciprocal tariffs.

They are expiring on 8 Jul 2025.

After this, unless an extension or new agreement is announced, the suspended country-specific tariffs could return.

Again, tariffs may (again) dampen US market sentiments, as US is at a critical inflection point for stagflation, a dire scenario in which economic growth slows while inflation remains high.

Stagflation is often regarded as even harder for policymakers to solve than a typical recession.

It is because higher inflation can prevent the Fed from cutting interest rates to boost US economy.

According to Apollo Global Mgmt, Chief economist, Torsten Sløk:

• Tariff hikes are typically stagflationary shocks. They simultaneously increase the probability of an economic slowdown while putting upward pressure on prices.

US - GDP vs Core PCE - Jan 2023 to May 2025

• Consensus forecasts on Wall Street for economic growth had drifted lower this year, while inflation forecasts have edged higher. (see above)

• This is the definition of stagflation.

Torsten Sløk Predictions.

(1) GDP halved from 2024’s peak.

• For 2025, US GDP will likely slow to about 1.2%.

• This reflects economic growth being slashed by more than 50%, compared to its peak in Q3 2024, when GDP expanded 3.1% YoY.

• According to the Bureau of Economic Analysis, so far for Q1 2025, GDP has declined by -0.3%, the first time US economy contracted since 2022.

(2) Inflation remains above average.

• By year end, inflation will probably hover around 3%.

• This is a significant increase from its prior forecast, that pegged inflation at about 2.4% before Trump announced his sweeping tariffs in April.

(3) Unemployment rises into 2026.

• US jobless rate will keep picking up through at least the next 18 months (1.5 years).

• Unemployment estimates could rise from current 4.2% to 4.4% (2025) and tick up to 5% or higher (2026).

• It is a fact that rising unemployment has historically been linked to periods when the economy experienced stagflation.

• According to US Bureau of Labour Statistics, when US went through stagflation in the '70s & 80s, unemployment peaked at about 9% in 1975, before cooling and rising to another peak of 10.8% in early '80s.

(4) 2025 Summer recession.

• There is a strong 25% probability of a recession over the next 12 months.

• Prior to Trump’s April tariffs, Apollo wasn't anticipating a recession at all for 2025.

• US economy could enter a recession as soon as Summer as tariffs swung into effect earlier in 2025, even if its a “temporary” baseline 10%.

• The idea stemmed from tariffs’ fall out that cause shipments to US ports and trucking demand to slow, leading to empty shelves and lower sales for firms.

• The effects of Trump's Liberation Day tariffs will need time to work their way thru the trade pipeline.

Above predictions are in contrast to most forecasters on Wall Street, where consensus is US economy will avoid a downturn in 2025, as US continues to make progress on trade negotiations.

My viewpoints: (mine only)

Having gone thru US economic reports ‘in details’ so far, I detected inflation is slowly creeping back into US economy.

Hence, I tended to agree with Apollo Global Mgmt, Torsten Sløk above assessment.

When it becomes more pronounced and obvious, perhaps that’s the tipping point for US market to slide gradually.

One other less-mention item is US domestic budget, Trump’s Big Beautiful Bill that could directly or indirectly sabotage US market.

Besides the fact that the Bill will pile another $3.3 billion onto US National Debt over the next decade, analysts have conveniently forgotten to factor that cutting budgets for different types of “aid” means US citizens might have to pay for these “reliefs” themselves.

This could leave them with less money for their normal or essential spending, affecting businesses in the process as well ?

Nevertheless, US reciprocal tariffs will be the key factor to monitor very closely, as we enter July 2025 regardless whether US market continue to chart new peaks or otherwise.

Whatever tariff rate each trade deal brings, the would-be tax imposed is likely to pass to US consumers - the question is “how much”.

Remember to check out my other posts. (See below). Help to Repost ok, Thanks.

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• Do you think US market will continue to rally in July 2025 as history documented ?

• Do you think it’s important to know how quickly US economy can affect the US stock market?

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