Published June 13, 2025
Continuing with Delta Research’s summary of recent market dynamics, we think the following is a good overview. Since this posting, Israel has attacked Iran. That will change the market dynamic somewhat in the short-term, though the broad market impact of such geopolitical events tends to diminish quickly.
“The S&P 500 has drifted higher in June and is less than 2% below its all-time high. What is pulling the market higher are the four horsemen: earnings, jobs, inflation and tariff talks.
Earnings: For the first quarter, earnings per share of S&P 500 companies rose 12.7% year-over-year. The Wall Street consensus analyst expectation was for a 6.5% increase. This was the seventh consecutive quarter of earnings outperformance.
Inflation: Total CPI was up 0.1% month-over-month in May versus consensus expectations of 0.2% and after increasing 0.2% in April. Core CPI, which excludes food and energy, was up 0.1% month-over-month versus consensus expectations of 0.3% and after increasing 0.2% in April. On a year-over-year basis, total CPI was up 2.4%, versus 2.3% in April. Core CPI was up 2.8% year-over-year, versus 2.8% in April.
Jobs: On Friday of last week, we learned that the unemployment rate is 4.2% and average hourly earnings rose by 0.4%, which translated into a better-than-inflation 3.9% year-over-year growth rate. Strong employment and wage gains should keep consumers spending and the economy on a growth trajectory.
Tariffs: U.S.–China trade talks in London led to China supplying rare earth elements to the U.S. immediately and a pull back in the tariff rate from 145% to 55%. Bloomberg is reporting that a deal between the U.S. and the European Union could be forthcoming making the July 9 deadline less important. Reuters noted that an interim deal with India might be announced by the end of June.
Polymarkets.com, the largest prediction/betting market on future events, shows the odds of a recession are back down to 27% from a recent peak of 66% on May 1.
The fear is economic activity has been pulled forward as consumers and businesses attempt to “get ahead” of tariff price increases and inflation is subdued as tariff price increases have yet to take full effect. Having a wall of worry for the market to climb is generally positive for equity prices. The underlying strength of the U.S. consumer and the job market continues to surprise and should allow equities to continue to climb higher as the tariff risk subsides.
Market Update
Stocks ran in place Monday following the weekend trade talks between the U.S. and China. Investors bid up semiconductor stocks in hopes that the talks would relax trade restrictions on the group. Apple’s developer conference underwhelmed investors leaving the stock down and trending lower through the week. Shares of Tesla popped higher after the company announced the start of its long-awaited robo-taxi service. Those gains continued Tuesday with semi stocks also furthering their gains. The stock market posted a +0.6% rise. That rise was largely given back Wednesday when President Trump provided details on the China trade talks offering little additional good news to what the market had already priced in. The consumer price index held firm to send Treasury rates down a touch. Thursday brought another pair of economic report favorable to interest rates. The reports helped stocks lift +0.3% despite a devastating plane crash in India which sent Boeing’s shares down -5%. An overnight military strike by Israel on Iran sent stocks lower at the open Friday. A late morning recovery came undone in the afternoon with shares closing down -1.2%.
After spending most of the week holding above 6000, Friday’s drop left the S&P 500 under that level and posting a weekly change of -0.36%. The Nasdaq 100 (QQQ) slipped -0.56%. Small cap stocks fell back -1.42% as the Friday news tilted investors back to a more cautious stance. The strike on Iran left oil prices higher by +9% for the week.
Warm wishes and until next week.