The information and opinions included in this document are for background purposes only, are not intended to be full or complete, and should not be viewed as an indication of future results. The information sources used in this letter are WSJ.com, Jeremy Siegel, Ph.D. (Jeremysiegel.com), Goldman Sachs, J.P. Morgan, Empirical Research Partners, Value Line, BlackRock, Ned Davis Research, First Trust, Citi research, and Nuveen.
IMPORTANT DISCLOSURE
Past performance may not be indicative of future results.
Different types of investments and wealth management strategies involve varying degrees of risk, and there can be no assurance that their future performance will be profitable, equal to any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.
The statements made in this newsletter are, to the best of our ability and knowledge, accurate as of the date they were originally made. But due to various factors, including changing market conditions and/or applicable laws, the content may in the future no longer be reflective of current opinions or positions.
Any forward-looking statements, information, and opinions including descriptions of anticipated market changes and expectations of future activity contained in this newsletter are based upon reasonable estimates and assumptions. However, they are inherently uncertain, and actual events or results may differ materially from those reflected in the newsletter.
Nothing in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice. Please remember to contact Signet Financial Management, LLC, if there are any changes in your personal or financial situation or investment objectives for the purpose of reviewing our previous recommendations and/or services. No portion of the newsletter content should be construed as legal, tax, or accounting advice.
A copy of Signet Financial Management, LLC’s current written disclosure statements discussing our advisory services, fees, investment advisory personnel, and operations are available upon request.
Between resilience and risk: How the market rebound may be tested by policy headwinds
US economics, inflation, and the Fed
The Federal Reserve took a slightly more hawkish stance at its June Federal Open Market Committee (FOMC) meeting. That included a continued pause on the interest-rate front, holding the federal funds rate in the range of 4.25% to 4.50%, even with recent data showing a slowdown in the pace of price growth at both the consumer and producer levels. The central bank wants more time to assess the impact of global affairs, including the developments in The Middle East and the Trump trade tariffs on the domestic economy according to Value Line.
Professor Siegel notes:
“Chair Powell’s press conference doubled the number of FOMC members penciling in no cuts for 2024, as Powell believes tariffs will lift prices. Treating a tax-induced price jump as a reason to stay restrictive is simply bad economics. A 10% sales tax does not warrant monetary tightening; neither does a tariff schedule, that is a tax on inputs. The Fed Funds Rate should already be almost 75-100 basis points lower — around 3.5% — to match the economy’s true neutral rate.”
The ongoing situation in The Middle East has taken a positive turn. After the United States completed a targeted aerial strike in Iran, said to cripple the nation’s nuclear weapons capabilities, President Trump was able to broker a delicate ceasefire deal between Israel and a militarily compromised Iran. Thus far, the truce has reduced concerns about a major disruption to global oil supplies. The price of crude oil fell sharply in response, which may prove to be a positive development on the inflation front.
Lower oil prices would also be good news for the U.S. consumer, as reduced energy costs make it less expensive to operate a home and run automobiles. This would likely free up more funds for discretionary purchases. However, The Conference Board reported that the Consumer Confidence Index declined in June, erasing some of the gain recorded in May.
Global economy
JP Morgan is still considering a major scenario for the second half of 2025 as a stagflation with a sub-par 1.4% annual global growth accompanied by a firming in core inflation to a 3.4% annual rate. The growth slowdown should be sectorally concentrated in goods activity, where global factory output and capex are expected to contract. The rise in core inflation should also be concentrated on goods prices and largely reflect tariff hikes passing through to US consumers. While emphasizing the difficulty in accurately gauging the transmission of an unprecedented trade shock and recognizing the potential for new policy/political surprises, JP Morgan maintains its conviction that this year’s shocks will have negative macroeconomic consequences, and that US recession risk remains elevated.
The financial markets’ turn towards optimism in recent weeks does not align with this assessment. The rally in global equity prices from April lows has gathered steam with both US and global indices touching new cyclical highs. Broader indices of US financial conditions have unwound nearly all of their earlier tightening, aided by a decline in near-term inflation compensation measures – which has increased expectations of near-term Fed easing — and a modest decline in US term premia. With markets currently expecting sustained strong earnings, little tariff price pass-through, and significant Fed easing, a Goldilocks scenario is again in ascendance. The easing in financial conditions increases the probability of higher global growth. At the same time, highly optimistic macroeconomic judgments are likely incorporated into financial market moves.
While JP Morgan highlights that tariffs, US consumer demand, global manufacturing softening and the Fed could still suppress the global economic growth, the bank still projects the global economy to grow at a 2.3% annual rate this year.
Stock market
The stock market came close to a bear territory this April, but since then came back up on the optimism about the economy and world conflicts. Looking at the illustration from BlackRock’s Student of the Market June 2025 publication, we can infer that the stock market usually does pretty well after such a sizeable pullback.
Keep the faith and stay tuned!
The information and opinions included in this document are for background purposes only, are not intended to be full or complete, and should not be viewed as an indication of future results. The information sources used in this letter are WSJ.com, Jeremy Siegel, Ph.D. (Jeremysiegel.com), Goldman Sachs, J.P. Morgan, Empirical Research Partners, Value Line, BlackRock, Ned Davis Research, First Trust, Citi research, and Nuveen.
IMPORTANT DISCLOSURE
Past performance may not be indicative of future results.
Different types of investments and wealth management strategies involve varying degrees of risk, and there can be no assurance that their future performance will be profitable, equal to any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.
The statements made in this newsletter are, to the best of our ability and knowledge, accurate as of the date they were originally made. But due to various factors, including changing market conditions and/or applicable laws, the content may in the future no longer be reflective of current opinions or positions.
Any forward-looking statements, information, and opinions including descriptions of anticipated market changes and expectations of future activity contained in this newsletter are based upon reasonable estimates and assumptions. However, they are inherently uncertain, and actual events or results may differ materially from those reflected in the newsletter.
Nothing in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice. Please remember to contact Signet Financial Management, LLC, if there are any changes in your personal or financial situation or investment objectives for the purpose of reviewing our previous recommendations and/or services. No portion of the newsletter content should be construed as legal, tax, or accounting advice.
A copy of Signet Financial Management, LLC’s current written disclosure statements discussing our advisory services, fees, investment advisory personnel, and operations are available upon request.
LET'S GET ACQUAINTED