Published June 20, 2025
This week we offer a summary of recent market and economic activities from Blaine Rollins and Hamilton Lane:
“The bounce in US equities and high yield credit spreads is a sign that the big White House tariff rates will not hold through year end. Stock and corporate bond investors are betting that margins will be safe, and that earnings will not be damaged. The government might bark about tariffs, but they will not bite because Americans want their goods available and affordable, and no one wants to see US multinational operations shift their exported sales manufacturing overseas. The weak Treasury bond market tells us that higher inflation will stick around as some tariffs remain in place. And the US dollar weakness suggests that owners of businesses and investors are now more concerned about deploying capital into US capex and investment assets.
While the market playbook seems to be set, expect continuing volatility around geopolitics and tariffs. While we all wish that the players involved in global conflict would just grab tickets to a Coldplay concert and find joy in song and dance, unfortunately some conflicts will continue to influence the markets like they did this weekend. And no idea when we will ever get to see a set of final trade agreement details, but we can bet on the can continuing to get kicked down the road to avoid damage to the US economy. Even this weekend we saw the White House back down on broad business immigration raids as the attacks on farms across the US last week caused pain for seasonal crop harvests. The barking will always stop when the strawberries and steaks don’t make it to market and the hotel rooms and dishes go dirty.
Looking through the markets further, I see the Technology sector just made an all-time new high led by the largest stock in the equity market, Microsoft. Shoot, even IBM made an all-time new high today, so keep the AI cloud hardware and software IPOs coming. Fastenal also made an all-time high last week, which has got to be proof that a major economic slowdown is not close at hand. And once again, new highs for the developed international market indexes which suggest that the new difference in opinions in the Middle East will be short lived.
Of course if you are anywhere near the technology space where AI is driving demand, you can grow your capex and get paid for it like Oracle…
@bespokeinvest
Away from tech, it is more difficult finding companies willing to grow their future capex…
@RenMacLLC: While there have been positive trade headlines in recent weeks, plenty of damage has been done. The New York Fed’s six-month capital spending plans series fell to a fresh low of -7.3 in June. Business investment outlook looks sluggish.
Continued uncertainty also leading to less hiring and rising joblessness…
Continuing claims for the week ended May 31 rose by 54,000 to 1,956,000, surpassing forecasts and reaching their highest level since November 2021. The four-week moving average of initial claims also ticked up to its highest point since August 2023. The labor market appears to be softening.
Take note of the new 3-year low in the US dollar index last week…
StockCharts.com
More and more global trade is now occurring in non-US dollar currencies as exporters do not want to own the volatility of greenbacks…
When Paula Comings, the head of currency sales for US Bancorp, talks to US importers, she increasingly hears the same message: Their foreign counterparties no longer want to be paid in dollars.
Instead, they ask for settlement in euros, Chinese renminbi, the Mexican peso and the Canadian dollar, looking to limit their exposure to further swings in the greenback.
“A lot of clients previously were reluctant because dollars were sacred in the eyes of the supplier,” Comings said. “Now the vibe from overseas vendors seems to be, ‘Just give us our currency.’”
While the dollar saw a brief boost amid the turmoil in the Middle East, the currency is still about 8% lower this year against a basket of other currencies. That followed a steep gain of 7% in the final quarter of 2024, according to a Bloomberg index. This volatility, which complicates pricing decisions and poses earnings risks, increasingly means the dollar is falling out of favor…
“The change is difficult to quantify in real time, but in markets from East Asia to Latin America, a growing number of exporters are opting to denominate contracts in euro, yuan, or even local currencies,” said Karl Schamotta, chief market strategist at cross-border payments firm Corpay in Toronto.
Market Update
Stocks kicked off a 4-day trading week with a +1.5% rally in the Nasdaq as Iran signaled a desire to end hostilities with Israel. However those hopes were dashed when President Trump left the G7 meeting ahead of schedule Monday as the Iran-Israel situation worsened. Stocks slipped -0.8% on the news. Solar energy stocks were crushed when the latest version of the budget bill removed subsidies for the sector. Stocks gave up early gains Wednesday to close flat as investors considered the outcome of the Federal Reserve meeting. The central bank held rates unchanged noting an expectation that inflation will rise in the coming months as tariffs begin to show up in the price data. Markets were closed Thursday for the Juneteenth celebration. Resuming trade Friday the Nasdaq slid -0.5% following global markets lower as ceasefire talks between Iran and Israel failed to make progress.
Stocks continued to consolidate their May rebound as overhead resistance also kept prices from moving higher. The S&P 500 posted a -0.16% weekly move. The Nasdaq 100 (QQQ) was unchanged at -0.02%. Small cap stocks showed a slight +0.43% gain for the week.
Warm wishes and until next week.