Weekly Macro Report, June 29 2025
1. Economic Growth & Outlook
S&P 500 sales growth is forecast at 5% in 2025, aligning with a 2.5% real GDP growth expectation, down from 2.5% in Q4 2024 to 1.1% by Q4 2025. The Fed Funds Effective Rate is projected at 3.75%-4.00% by end-2025, with futures implying a gradual cut toward the 3.00%-3.25% neutral range in 2026. This divergence suggests slowing growth momentum, with equities reflecting moderate expansion amid tightening monetary policy.
2. Labor Market
Initial unemployment claims have stabilized near recent lows, while the US unemployment rate held steady at 4.2% through May 2025, indicating limited slack. Nonfarm payrolls grew by 139,000 in May but with slower momentum compared to prior months and modest year-over-year gains. This suggests a slight labor market loosening trend, tempering wage inflation pressures and supporting the Federal Reserve's pause on rate hikes given uncertain economic momentum around June 2025.
3. Interest Rates & The Yield Curve
The 10-year and 2-year Treasury yields recent movements reflect shifting expectations of monetary policy and growth, with the 10-year yield at 4.33% as of late June 2025. Meanwhile, Aaa-Baa credit spreads are key gauges of credit risk, typically widening with recession fears, indicating increased funding costs. The 30-year mortgage rate tracks the 10-year Treasury but remains elevated at 6.83%, signaling higher funding costs for borrowers and sustained duration demand under current financial conditions.
4. Bond Market Insights
As of June 26–27, 2025, the 10Y-2Y yield curve is slightly inverted at -0.9% (4.39% - 3.3%), signaling subdued growth prospects. Real 10Y yields remain elevated, indicating persistent inflation concerns. Concurrently, Baa-Aaa credit spreads show moderate risk premia, reflecting cautious but stable credit sentiment. The inversion aligns with rising real yields and steady credit spreads, suggesting market pricing of slower growth, persistent inflation, and contained credit risk.
5. Inflation Dynamics
US inflation momentum shows CPI rising 0.2% in May 2025, with a 12-month increase of 2.4%, while core CPI remains near 2.8% year-over-year. PPI growth, reflecting producer prices, generally precedes consumer prices, indicating continued upstream cost pressures into mid-2025. Inflation expectations align near 2.5%, consistent with Federal Reserve targets, situating US inflation trends in line with moderate global inflation easing seen in advanced economies.
6. Money Supply
M2 YoY growth peaked near 27% in early 2021, preceding the CPI inflation peak of about 9% in mid-2022 by roughly 15 months, indicating a lagged positive correlation between liquidity expansion and inflation. Loans & leases YoY growth, reflecting bank lending, tends to support M2 increases but at a moderated pace lately. Central bank policy (asset purchases, rate setting) drove M2 surges, fueling inflation, though the correlation weakens outside crisis periods, suggesting liquidity was inflationary during 2021–22 but potentially neutral or restrictive since.
7. Consumer Sentiment & Spending
As of May-June 2025, the University of Michigan Current Sentiment rose to 60.7, while Expectations held near 47.9, widening the sentiment spread. This spread typically tracks the yield curve spread (10Y-2Y), which has shown a concurrent increase, indicating stable consumer spending prospects. The alignment of these spreads suggests moderate consumer confidence and potential spending resilience in the near term.
8. Housing Market
Home-price indices show a projected 1.4% decline in 2025 amid rising housing inventory, which has increased despite a slight decrease in new listings by May 2025. Existing home sales are expected to grow 1.9%, supported by inventory gains but restrained by elevated mortgage rates and labor market concerns. These higher rates reduce affordability, balancing supply and demand and slowing price momentum after recent gains.
9. Equity Markets Overview
SPY advanced 1.11% through June 24, 2025, nearing its all-time high as its 50-day moving average crossed above the 200-day on June 27, signaling potential sustained upside. Technology led the sectors with gains driven by AI-related strength, especially Nvidia’s 4% jump, while Energy and Financials showed mixed rotation amid geopolitical uncertainty and rate outlooks. Defensive sectors like Utilities lagged, reflecting a breadth shift favoring cyclical and growth areas.
10. Market Valuation
The S&P 500 P/E stands near 28, above its long-term average of 25, while the Shiller PE remains elevated, reflecting subdued real yields compressing discount rates. The Buffett Indicator exceeds 130%, signaling the market's capitalization surpasses GDP noticeably. This valuation gap versus international markets stems from the US’s higher earnings growth expectations and persistently lower real yields since 2023, contrasting with rising sovereign yields abroad and differing economic cycles. Forward P/E moderates to 21.8 for 2026, signaling some normalization.
11. Market Internals
The VIX declined from 20.62 on June 20 to 16.59 on June 26, signaling reduced near-term market volatility and risk aversion. Growth factors and momentum showed relative strength, while value and defensive sectors lagged, indicating a tilt toward cyclical/risk-on sentiment. Among factors, quality, minimum volatility, and high dividend yield moderated declines, supporting breadth despite small cap and equal weight underperformance through late June 2025.
12. Global Equity Performance
As of late June 2025, Hong Kong's Hang Seng leads with a 20.7% YTD gain, followed by Germany's DAX at 13.3%, while Japan's Nikkei lags with a 3.9% decline. The S&P 500 trails global peers, reflecting muted US returns. Emerging markets like Hong Kong and India offer diversification potential against developed market headwinds, underscoring the value of allocating across regions to balance growth and volatility. EM/World and USA/World ratios highlight this geographic performance dispersion.
13. Commodities
Gold outperformed oil through early 2025, pushing the Gold/Oil ratio to an extreme 39.6 barrels per ounce in February, signaling economic uncertainty and potential slowdown. By May, the Oil-to-Gold ratio hit a record low, reflecting shifting supply-demand dynamics and risk repricing. Gold and silver's inverse correlation to the DXY suggests dollar strength continues to pressure precious metals. Copper's weak link to the 10-year yield signals subdued industrial demand, indicating cautious risk appetite and a late-cycle environment. The Gold/Oil–VIX relationship confirms heightened volatility spikes during growth revisions in H1 2025.
14. Digital Assets
As of late June 2025, Bitcoin shows moderate stability while Ethereum trades between $2,800 and $3,250, recently reaching $3,250 on June 14 with a 2.3% daily gain. Ethereum's ETH/BTC pair rose slightly to 0.048 BTC, indicating mixed market momentum. Institutional interest in Ethereum futures is strong, with open interest hitting $1.2 billion mid-month. Risk remains from macroeconomic shifts, but reward potential persists if Ethereum breaks above $3,000 resistance.
15. Currencies
The DXY rose 0.22% to 99.98 on June 27, supported by hawkish US inflation data and trade tensions with Canada. EURUSD declined 0.30% amid relative US rate strength, while USDJPY surged 0.50%, reflecting safe-haven flows. These moves suggest tighter US monetary policy expectations, potentially restraining global trade and reallocating capital toward the dollar, increasing imported inflation risks in currency-sensitive economies.
16. Debt Levels
As of late 2024, U.S. household debt stands near 62% of GDP, showing a slight decline, while federal debt-to-GDP remains elevated around 83% with rising interest costs. Corporate debt ratios have modestly eased but corporate leverage stays high. Compared to peers with falling household and corporate debt post-pandemic, U.S. debt profiles constrain policy flexibility and pose refinancing risks amid rising yields. Opportunities exist to moderate private sector leverage to enhance resilience.
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