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The markets just kicked off summer with a bang. Both the S&P 500 and Nasdaq hit record highs this week, climbing 24% and 33% respectively since their April lows. The rally was fueled by easing geopolitical tensions, falling oil prices, more dovish Fed messaging, and strong performance from the tech sector. Even the Dow and small-cap indexes joined the party, each rising more than 2.5%. Crypto joined the party too, with Bitcoin jumping 6% on the week, close to an all-time high.
Tech stocks, particularly mega-cap AI and cloud players, continue to lead the charge. Since April, growth sectors like tech, communication services, and consumer discretionary have outperformed the broader S&P. Strong Q1 earnings, high investment in AI infrastructure, and investor excitement have all helped fuel this momentum. Still, valuations are getting frothy, suggesting a slower pace of gains ahead. For balance, health care and financials offer more attractive valuations and potential upside if the economy re-accelerates.
Oil, which spiked over 20% in June due to Middle East tensions, reversed course and fell 13% over the last week. It settled around $65 per barrel on Tuesday and didn’t budge. With Iran avoiding attacks on key oil infrastructure, markets breathed a sigh of relief. Consumers can, too, as falling gas prices support both summer travel and lower inflation.
Meanwhile, the Federal Reserve gave markets the dovish flavor of status quo. Though it held rates steady at 4.25%–4.50%, the Fed reaffirmed expectations for two rate cuts this year, and two more through 2027. Fed Governors Waller and Bowman broke ranks and called for July cuts, prompting some speculation about whether there is some gamesmanship for the next nomination afoot.
May’s Personal Consumption Expenditures report showed core inflation ticking up slightly to 2.7% but remained well within range. A sign of the future or just a monthly aberration? We’ll have to “wait and see” in Fed parlance. While softer consumer spending and personal income added weight to the argument for easing, it’s too little too late in my opinion. July cuts are dead. Markets are now pricing in between two and three cuts in 2025 despite nearly half of the FOMC calling for one or fewer in the June Summary of Economic Projections.
The economic backdrop continues to be mixed: durable goods orders surged 16.4%, although only due to huge aircraft orders. New home sales fell 13.7%, and consumer spending slipped. Treasury yields dipped early on dovish Fed comments but rose again after a slightly hotter inflation print.
What this means for investors
While momentum is on investors' side, potential speed bumps like trade negotiations and economic slowdowns may bring short-term volatility. June economic reports aren’t likely to clear up the muddy picture. Summer isn’t usually a strong season for the market, so use any strength to review portfolios, rebalance, and consider opportunities in underappreciated sectors or geographies because even bull markets need a little protection from the heat.
Market Activity
The S&P 500 and the NASDAQ crossed all-time high closing prices this week, 129 and 194 days, respectively, since the last ATH. For investors who hung on during the slow (and then fast) market correction, this is vindication and hopefully some additional gains. Anyone who continued to invest throughout should have more than a year’s worth of gains from the April 8 bottom.
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Housing (false) starts
- Inside Lennar’s playbook: Bigger incentives and market share over margin | In Q2 2025, Lennar spent an average of 13.3% of the final sales price on sales incentives—its highest incentive rate since 2009.
- Existing home sales showed a little life in May, but the total annualized sales are still very low with Redfin reporting that listings are falling in major metros. Meanwhile new home sales missed by a mile. The housing market is in rough shape and mortgage rates and high prices are to blame. One or both need to crack lower or we’re going to be stuck like this.
The housing market is a punishing mix of high prices and low sales momentum. Rising inventory doesn't translate to sales, and lower mortgage rate aren't on the horizon for a while.
Other stuff
- The real issues facing the Social Security program aren’t inefficiency or fraud | Strengthening the program’s future will require balancing tradeoffs of increasing revenue and reducing benefits.
- Buyers Beware of the Toll-Laden Bridges to Private Markets | Institutional Investors Draw Retail Investors in so They Can Get Out.
- Buffer ETFs vs. T-Bills: A Total Cost of Ownership Perspective | The author’s personal story of weighing options for de-risking for a fresh short-term timeframe.
Chart(s) of the week
Torsten Slok is catching a lot of flak for posting this chart (below) on his Daily Spark newsletter. First things first, Torsten is a giant of the financial industry and is a favorite of mine. But no one is perfect, so let’s discuss what is happening here and why people are upset.
The mains issue is that many people look at the way this chart is generated, by using “average annualized return” instead of compound annual growth rate or just average total return, and see some data fudging.
Here is the note in the caption which explains how this data is calculated.
Note: The calculation takes 5-year annualized and 10-year annualized returns for every 5-and 10-year window with sample starting in 2000 to 2024 and averaging returns over time.
I don’t have the data he used so we’re going to make up an example to explain why this data analysis is a little funny and disadvantages the S&P 500 to skew the results.
Year 1: +10%, Year 2: -15%, Year 3: +20%, Year 4: +25%, Year 5: -10%
Starting Value = $100; Final Value = $126.23
Average annualized return: 6% Average 5-year return: 5.2% Compound annual growth rate: 4.77%
The more volatile an asset is, the bigger the difference between the averages and the CAGR, which isn’t lost on Apollo. And this is why people aren’t pleased with this depiction of PE and PC performance.
All-time highs, counter to popular belief, are not times to sell or signs of the top. All-time highs are signs of robust growth and better investment returns. Check out this great chart from Ritholtz Wealth that demonstrates not only the great returns of the market all the time, but especially at all-time highs.
Was something happening with Tesla recently? Whatever it was, it sure made the stock jump around.
Source: Bespoke
Source: Bespoke
Related: Rate Cuts or Not? Inside the Fed’s Divide Amid a Slowing Economy and Soaring Tariffs