| GoalVest Advisory
July Update
Markets have moved solidly positive for the year, which was helped by a relief rally.
As we end the month of June, equity markets have moved positively for the second month in a row, driven by a late-month relief rally. For the month, through the 24th, the S&P 500 was up 3.3%, the tech-heavy Nasdaq was up 4.1%, and the slower-growing companies of the Dow Jones Industrials were up 2.2%. Additionally, as represented by the Russell 2000 index, small-cap stocks were up 4.9%.
For the year-to-date period through June 24th, the S&P 500 was up 4.2%, the Nasdaq up 5.9%, and the Dow Jones Industrials were up 2.0%. Additionally, despite a positive June, small-cap stocks remained negative at -2.5% for the year-to-date period.
The CBOE Volatility Index (the VIX) closed on the 24th at 17.5, way down from the 60.1 intraday high reading on April 7th. This reading is well below the 20 value that is considered stable. Positively, it has been trending down for the past few weeks. While the levels of the volatility index have improved, investor fears remain over a possible uptick in inflation and an unresolved tariff policy.
Fixed income markets remain positive after a slow start to the year. The Bloomberg Bond Aggregate index is up 3.6% for the year-to-date period, higher than last year’s 1.3% return. The bond index was up 1.1% in June through the 24th.
Economic data
The Bureau of Labor Statistics (BLS) released the May CPI inflation report on June 11th. The headline CPI rose by 2.4%, the same as the prior months. The month-over-month number increased by .1%, which is better than last month’s .2% reading. A continued decrease in energy costs drove the monthly levels.
The Fed held short rates steady after its June 18th meeting but stated that two rate cuts could occur by the end of the year.
The BLS also reported unemployment numbers on June 6th. May job growth was reasonably strong, at 139,000 new jobs, versus 177,000 new jobs in April. The unemployment rate remained steady at 4.2%. This jobs report was interpreted as strong enough for continued GDP growth.
Market-driven by news – including a relief rally
With earnings behind for the quarter, the June focus turned to the strike on Iranian nuclear facilities by Israel on the night of June 12th. Markets reacted cautiously on June 13th, with the Nasdaq down 1.3% and the S&P 500 down .85%. Oil spiked by 7.2% with worries over how contained the strikes would be and what the U.S. involvement might be. Notably, the U.S. did strike Iranian nuclear facilities on June 22nd. However, the market-determined the attacks to be very contained, and given a relatively mild Iranian response, it helped to continue a relief rally that had started in the prior week. By the close of the 24th, oil fell back 11.9% from its high point on June 20th.
Tariffs remain an unresolved issue, but the significant news events of the Middle East have completely overshadowed the topic. We expect the tariff issue to resurface in July but believe a middle ground on rate levels can be reached.
Our focus continues on opportunities in favorable sectors and companies. As we have mentioned, staying diversified across many types of investments, keeping a portion of assets liquid, and being ready to make portfolio adjustments can help us get through periods of volatility.
We are encouraged by the strong rebound off the market bottom in April, the containment of broader conflict in the Middle East, and the lower levels of volatility currently in the markets.
To Sum Up
Equity markets can continue to recover in 2025, driven by earnings. While recently down, volatility is likely to remain higher than last year. We hope for a tariff resolution, but some uncertainty may be in store. Investment opportunities remain diverse, and we remain more optimistic over the long term.
The market’s present valuation is 21.6 times forward earnings, up slightly from the start of the year.
The economy remains in a strong position, and U.S. companies remain well-managed, profitable, and innovative, which helps to drive our longer-term expectations.
Sevasti Balafas, CFA, CPWA®
CEO & Founder
GoalVest Advisory
Sources: JP Morgan Asset Management, Bureau of Economic Analysis, Bureau of Labor Statistics, Morningstar, Factset, Barron’s, KKR, and YCharts
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