Market Note: Records Reached

By Hightower Great Lakes on June 30, 2025

Uncertainties Becoming Tailwinds

We continue to see markets rise on the theme of uncertain expectations that have developed into positive outcomes. We previously noted our optimism of a quick resolution in the Middle East conflict, and we saw just that.

Despite the surprise strike by the U.S. on three key nuclear sites in Iran last weekend, the response turned out to be underwhelming. Markets began the week lower on Monday, but those initial losses were quickly erased. Iran and Israel agreed to a ceasefire, putting tensions on the back burner.

Despite the rumors, the Strait of Hormuz remained open and oil trade was hardly disrupted despite the conflict. Oil weakness was a further tailwind as it gave back all the gains made since Israel’s strikes two weeks ago and ended the week back at early June levels.

Positive tariff developments continue to provide a key tailwind for markets. Last Thursday, President Trump said the U.S. and China signed a trade deal. This deal seeks to allow rare earth exports and ease technology restrictions.

China plans to review and approve export applications for items subject to export control rules, while the U.S. will correspondingly cancel a range of existing restrictive measures imposed against China. This agreement was a codification of the terms laid out in the Geneva talks last month.

Furthermore, President Trump also said that deals are imminent with at least ten trading partners, with India being one of those ten countries. Treasury Secretary Scott Bessent has also said that trade negotiation timelines could be extended for certain trading partners if they are negotiating in good faith.

Markets have remained responsive to ongoing tariff negotiations and geopolitical developments, which are both trending in a positive direction and adding fuel to the markets’ post-‘Liberation Day’ recovery.

Major indices ended the week higher, and the S&P 500 ended the streak of two straight weekly declines. The S&P 500 ended up 4.42%, the Nasdaq rose by 6.07% and both indexes ended the week at record highs. Big tech was the leader this week, notably fueled by NVDA increasing by 9.7% and META by 7.5%.

Despite all the uncertainty, markets have moved higher and are up over ~20% from the April lows. The economy continues to push equities higher, currently growing at ~3% and averaging ~2% growth through the second quarter.

Corporations continue to exceed expectations with earnings growing in double digits so far this year, while being predicted only in the mid-single digits. The U.S. dollar has fallen by more than 10% this year, which is also a tailwind for equities historically.

$7 trillion of cash remains on the sidelines, which could also push markets higher once deployed. The uncertainty boxes continue to be checked, and the markets now sit at all-time highs because of it.

Chart 1: $7 Trillion of Cash Remains on the Sidelines[1]

Inflation Remains Under Control

Last Friday, we saw the Personal Consumption Expenditures Price Index (PCE) was released. The reading showed a 0.1% increase, putting the annual inflation rate at 2.3%. Excluding food and energy, core PCE was 0.2% m/m and 2.7% y/y, compared to estimates of 0.1% and 2.6%.

Fed policymakers consider core to be a better measure of long-term trends and use that figure as their best gauge of inflation. Although it was a minimal rise, markets had little reaction to the data, and hopes remain alive for the Fed to cut interest rates soon, as inflation certainly has not shown signs of re-acceleration.

There was a lot of Fed speak this week, which continued to show the emerging split between hawkish and dovish camps. Fed Vice Chair Michelle Bowman said it would be appropriate to consider lowering the policy rate as soon as next month if the data cooperates.

Fed Chair Jerome Powell still advocates for a more cautious approach and reiterated his previous remarks that policy remains well-positioned to wait and watch before adjusting rates. However, he did indicate that rates would already be cut if tariffs were not a part of the equation.

This is a key detail as the tariff deadline approaches, and we still have not seen any long-term inflationary impacts from tariffs appear in the hard data yet. It is important to remember that just three years ago, inflation was ~9% and now it is hovering around ~2%.

Markets are now pricing in around ~64 basis points (bps) of cuts through year-end, up from ~50bps a week ago. We still expect the Fed to be cutting rates soon.

Chart 2: Core PCE Y/Y[2]

Micron Earnings Beat

Last week, Micron (MU) reported tremendous earnings, exceeding both revenue and earnings per share (EPS) estimates. The company’s revenue increased 37% y/y to $9.3 billion, while EPS jumped to $1.91, significantly up from $0.62 last year.  

The company highlighted strong growth in its high-bandwidth memory (HBM) products, seeing an almost 50% sequential increase in its sales of high-bandwidth memory chips.

These chips have become vital for AI computing, providing the memory that those processors need to perform their computations efficiently. The chips underscore the rapid expansion and impact of the AI and data center boom on the memory market.

These strong results have refueled our AI theme. We remain bullish on AI, Data Center, Grid, and Power, which remain dominant with several high-profile developments continuously being announced. 

Fixed Income

Last week, U.S. Treasury yields experienced a broad rally across the yield curve. Driven by dovish remarks from two Federal Reserve governors, downward revisions to 1Q25 GDP growth to -0.5%, and a PCE report that reinforced expectations for interest rate cuts. By the week’s end, the 2-, 10-, & 30-year yields were lower by 16, 10, & 5 basis points, respectively.

Within the FOMC, voting members expressed divergent views on the timing of potential rate reductions. Governors Bowman and Waller indicated openness to recommending cuts at the July meeting if supported by the incoming data.

Other members, including Federal Reserve Chair Powell, maintained a ‘wait-and-see’ stance. Market participants adjusted their expectations, bringing forward the anticipated timing of the first rate cut to the September meeting from the previously expected October meeting.

Markets also priced in an additional 13 basis points of cuts for 2025, projecting a year-end policy rate 64 basis points lower than current levels (between 2-3 cuts).

Over the week, investment-grade spread tightened 1 basis point to +130, and high-yield spread narrowed 8 basis points to +348. Both investment-grade and high-yield spreads are now at tighter levels than pre-Liberation Day.

US credit ratings improved drastically last week as the main rating agencies issued 72 upgrades and 17 downgrades. Financials led with the most upgrades, while Consumer Discretionary had the most downgrades.

Tax-exempt underperformed but yields followed Treasuries lower, falling 1-4 bps across the curve. This upcoming week, investors will be receiving $33 billion of maturing and called principal.

The Week Ahead

Economics – Tuesday: PMI Manufacturing, Construction Spending, ISM Manufacturing, JOLTS; Wednesday: ADP Employment Survey; Thursday: Hourly Earnings, Initial Claims, Manufacturing Payrolls, Nonfarm Payrolls, Durable Orders, ISM Services

Earnings –Tuesday: STZ

Return for Selected Indices^[3]

Click here to read last week’s Market Note (6/30).

Disclosures

Investment Solutions is a group comprised of investment professionals registered with Hightower Advisors, LLC, an SEC registered investment adviser. Some investment professionals may also be registered with Hightower Securities, LLC, member FINRA and SIPC. Advisory services are offered through Hightower Advisors, LLC. Securities are offered through Hightower Securities, LLC.

This is not an offer to buy or sell securities. No investment process is free of risk, and there is no guarantee that the investment process or the investment opportunities referenced herein will be profitable. Past performance is neither indicative nor a guarantee of future results. The investment opportunities referenced herein may not be suitable for all investors.

All data or other information referenced herein is from sources believed to be reliable. Any opinions, news, research, analyses, prices, or other data or information contained in this presentation is provided as general market commentary and does not constitute investment advice. Investment Solutions and Hightower Advisors, LLC or any of its affiliates make no representations or warranties express or implied as to the accuracy or completeness of the information or for statements or errors or omissions, or results obtained from the use of this information. Investment Solutions and Hightower Advisors, LLC assume no liability for any action made or taken in reliance on or relating in any way to this information. The information is provided as of the date referenced in the document. Such data and other information are subject to change without notice.

This document was created for informational purposes only; the opinions expressed herein are solely those of the author(s) and do not represent those of Hightower Advisors, LLC, or any of its affiliates.

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[1] Source: Bloomberg, As of June 29, 2025.

[2] Source: Y Charts, As of June 29, 2025.

[3] Source: Bloomberg. As of June 30, 2025