June Market Update: The Rally Continues
June kept the good times rolling from May. Markets powered higher for the second straight month, with the S&P 500 breaking above 6,000 for the first time ever and both the S&P 500 and NASDAQ hitting new records.
U.S. Markets Stay Hot
All four major indexes posted solid gains between 4% and 6%. What’s driving this? A few key things came together: most companies beat their earnings expectations, inflation cooled down more than expected, and the U.S. and China agreed to ease some tariffs and restart regular trade talks.
The big inflation news was encouraging – prices only rose 2.4% year-over-year, the slowest pace in two years. When inflation fears calm down, investors get more comfortable taking risks.
June’s Winners:
- Dow Jones: +4.2%
- S&P 500: +4.5%
- NASDAQ: +5.9%
- Russell 2000: +5.1%
The World Joined the Party Again
Global markets followed the U.S. lead once more. An impressive 48 out of 49 developed market indexes posted gains, with most rising more than 2%. Emerging markets did well too, with 43 out of 46 countries seeing their stock markets rise.
Global Market Performance – June 2025
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Source: MSCI. Past performance cannot guarantee future results
The fear index (VIX) dropped another 8% in June, showing investors are getting more comfortable with risk.
Almost Every Sector Had a Good Month
Ten out of eleven sectors posted gains, with six sectors rising more than 4%. Information Technology continued to lead the way with an 11.23% gain – that’s on top of May’s 12.24% surge. Communication Services also stayed hot with a 9.07% gain.
Even Energy bounced back nicely with a 5% gain after struggling in May.
Sector Performance Comparison
| S&P 500
Sector |
May
2025 |
June
2025 |
| Information Technology | +12.24% | +11.23% |
| Energy | -2.01% | +4.98% |
| Health Care | -4.66% | +3.08% |
| Real Estate | +2.04% | +1.57% |
| Consumer Staples | +1.99% | -0.91% |
| Consumer Discretionary | +9.44% | +4.76% |
| Industrials | +10.08% | +4.44% |
| Financials | +5.31% | +4.01% |
| Materials | +4.16% | +2.81% |
| Communication Services | +9.34% | +9.07% |
| Utilities | +2.48% | +0.78% |
Source: FMR
The Fed Stays Put (For Now)
As expected, the Federal Reserve kept interest rates unchanged at 5.25-5.50%. Fed Chair Jerome Powell said they want to see more proof that inflation is really under control before they start cutting rates. But with inflation dropping to 2.4%, that proof might be coming soon.
Inflation Finally Cooling Off
This was the big story of the month. Consumer prices actually dropped 0.1% in June – the first monthly decline since May 2020. Gas prices fell 3.8%, which helped a lot. Even core inflation (excluding food and energy) only rose 0.1%, the smallest increase since August 2021.
Year-ahead inflation expectations dropped from 6.6% to 5.0% – a big improvement that suggests people think the worst of the inflation spike is behind us.
The Economy Is Still Bumpy
The economy shrank 0.5% in the first quarter (revised down from the earlier 0.2% estimate). The main culprit? We imported way more stuff as businesses rushed to buy things before potential tariffs kicked in. That import surge actually subtracted nearly 5 percentage points from GDP growth.
People Are Feeling Much Better
Consumer confidence jumped 16.3% in June – the first increase in six months. People are feeling better about their personal finances and business conditions, both up around 20%.
Even though people are more optimistic, they’re still worried about potential economic slowdowns and the impact of tariffs.
Corporate Earnings Still Strong
Most S&P 500 companies continue to beat earnings expectations, though growth is slowing. The estimated earnings growth for Q2 2025 is 5.0% – solid but the lowest since late 2023.
Company valuations are getting a bit stretched though, with the forward price-to-earnings ratio at 21.9, well above the 5-year average of 19.9.
Housing Market Keeps Cooling
Home price growth continued to slow, with national prices up just 2.7% year-over-year in April – the slowest pace since mid-2023. High mortgage rates (averaging 6.77%) are definitely weighing on the market.
Interestingly, the pandemic winners like Tampa and Dallas are now seeing price declines, while traditional markets like New York, Chicago, and Detroit are leading the way higher.
Consumers Pulled Back on Spending
Retail sales dropped 0.9% in May – the biggest decline since May 2023. Car sales fell 3.5% as the rush to buy before tariffs faded. But online sales stayed strong, up 8.3% from last year, and restaurant spending rose 5.3%.
The core spending measure (excluding cars, gas, and building materials) still rose 0.4%, suggesting the underlying trend isn’t too bad.
Mixed Economic Signals
The job market stayed solid with 139,000 new jobs in June and unemployment holding steady. But the Leading Economic Index dropped for the 15th straight month, suggesting some economic weakness ahead.
Oil prices rose modestly to $64.77 per barrel, though they’re still down 22% from last year.
Bottom Line
June showed that the May rally wasn’t a fluke. With inflation finally cooling off meaningfully, corporate earnings staying solid, and trade tensions easing, markets had plenty of reasons to celebrate.
The big question now is whether the Fed will start cutting rates soon. With inflation dropping to 2.4% and some signs of economic softening, rate cuts could be on the horizon – which would likely be good news for stocks.
That said, we’re not out of the woods yet. The economy did shrink in Q1, housing is still struggling with high rates, and consumers are being more careful with their spending. But for now, the combination of cooling inflation and resilient corporate profits is keeping the market rally alive.
Additional Sources:
umich.edu; spglobal.com; census.gov; bea.gov; factset.com; conference-board.org; msci.com; fidelity.com; nasdaq.com; wsj.com; morningstar.com