June Update
Headlines and Highlights
- GOP megabill nears final passage: President Trump’s sweeping domestic policy package of tax breaks and spending cuts passed the Senate and was sent back to the House for final deliberations. The 940-page megabill would extend nearly $4 trillion in 2017 tax cuts due to expire at year-end and partially pay for them by cutting spending on Medicaid and other safety-net programs. The nonpartisan Congressional Budget Office says the Senate legislation would add nearly $3.3 trillion to the deficit over a decade and result in 11.8 million more uninsured Americans by 2034. White House economists say the bill would boost the economy and reduce deficits.
- Trade talks step up as tariff deadline nears: Negotiators from more than a dozen major U.S. trade partners are racing to secure deals with Washington before the expiration next week of President Trump’s 90-day pause on the implementation of “reciprocal” tariffs. Trump has said he is unlikely to extend the deadline and has threatened to impose higher tariffs if countries do not reach agreements. A 10% universal tariff on U.S. imports from all countries has been in place since April 15th. Additional tariffs ranging from 10% to 50% on goods from many other countries could be imposed if bilateral trade deals are not agreed to before next Wednesday.
- Stock market ends dramatic quarter in record territory: S. stocks made strong gains for a second straight month on investor confidence in coming trade deals and interest-rate cuts. The S&P 500, which fell nearly 20% in the drawdown following the start of President Trump’s trade war, gained it all back and reached midyear at an all-time high and up 6.1% in 2025. The Magnificent Seven tech stocks led the way in a rebound joined by the broader market. International stocks added 2.4% for a gain of 20.3% through six months in trouncing their U.S. peers, aided by the dollar’s 11% drop. Bonds and REITs added to their modest first-half returns.
Select Market Returns
Our Views
- U.S. stocks proved resilient in the second quarter but their performance for the rest of the year hinges in large part on the extent to which tariffs affect corporate earnings, inflation and the global economy. They should benefit from final approval of the tax-cuts-and-spending bill pending in Congress.
- International stocks are well-positioned to deliver continued positive performance in the second half, if at less than the blistering pace of the first half. European markets continue to be particularly attractive due to still-favorable valuations, strong corporate earnings, accommodative monetary policy and increased public investment in defense and infrastructure.
- Geopolitical risks for investors remain substantial despite the so-far-successful June 24th cease-fire in the Israel-Iran war. The possibility of further retaliation from Iran for the U.S. bombings, continuing friction in the Middle East, and Russia-NATO tensions surrounding the war in Ukraine all pose potential threats for markets this summer.
- The Federal Reserve is nearing but likely not quite ready to make its first interest-rate cut since December as the labor market slows and inflation remains moderate. We expect the Fed to keep the benchmark rate at 4.25% when it reconvenes July 29th and 30th before cutting by a quarter-percentage-point in September and again at least once more by year-end.
- The tax-cuts and spending bill undergoing final deliberations in Congress heightens concern about the long-term consequences of the growing federal debt. In the near term, however, it should provide a substantial boost to the economy – extending the 2017 tax cuts; adding some tax breaks, including incentives for businesses to invest and expand; and new spending on infrastructure, immigration enforcement and the military.
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