Week in Review: June 13, 2025

June 16, 2025

Recap & Commentary

Markets ended the week lower following Israel’s surprise airstrikes on Iran’s nuclear facilities on Friday. The strikes stoked fears of a larger-scale confrontation between the two countries with the possibility of pulling in other countries including the US and Iranian proxies within the region such as Hezbollah, Hamas, and the Houthis. Oil prices gained 8% on Friday following the attack, given the region’s importance to the global energy markets.

Friday’s pullback reversed what had been a modest gain over the first four days of the week as investors digested inflation data and the US/China trade deal while looking ahead to this week’s Federal Reserve meeting where officials are expected to leave rates unchanged. Nonetheless, investors will be interested in hearing from Fed Chair Jay Powell at his post-meeting press conference.

Following two days of negotiations between the US and China at the start of the week, the two countries reach an agreement that US officials described as a “done” deal, and which Chinese officials described as a “framework” to build upon prior negotiations held between the two countries in May that resulted in the current 90-day pause of the most draconian tariffs between the two counties. The dearth of details following the talks did little to move markets.

Economic Commentary

Inflation pressures remained muted in May as evidenced by both consumer and producer price data.  For the month, headline consumer inflation (CPI) rose just 0.1%, vs. an expected 0.2% increase, aided by cheaper gasoline. Core CPI, excluding food and energy prices, also rose 0.1% vs. an expected 0.3% increase. A 0.3% increase in shelter prices was the primary driver of upward price pressure. Compared to a year ago, core CPI rose 2.8% for the third consecutive month, tied with the prior two months for the slowest rate since March 2021.

At the producer level, for the month, headline prices (PPI) rose just 0.1%, better than the expected 0.2% increase. Core PPI excluding food and energy prices, also rose 0.1% vs. an expected increase of 0.3%. Compared to a year ago, core PPI rose 3.0%, the slowest pace since August 2024.

Though expectations remain that current tariffs will eventually lead to higher prices, thus far upward price movements have been muted as retailers seem to be drawing from inventories purchased prior to April 2. According to UBS, on average, the US holds about three months of inventory in its supply chain meaning the effects of higher tariffs might not be seen until late June or early July. To the extent companies rushed to build inventories ahead of April 2, the onset of higher prices might get pushed out further. Price for certain items, however, are beginning to rise, as evidenced by major appliances which experienced their second largest price increase on record in May.

Consumer sentiment unexpectedly improved during the first half of June, marking the first increase since December. Consumers’ views of current and future economic conditions both improved as near term (1-year) inflation expectations fell 1.5% to 5.1%, a three-month low, as higher prices stemming from tariffs have thus far broadly failed to materialize.

Of Note

Import volumes at the Port of Los Angeles fell 19% from April to May, highlighting the impact of higher tariffs and elevated uncertainty stemming from current trade policy.  Compared to May 2024, import volumes fell 9%.

Market Indices (As of 06/13/2025)

• Retail Sales
• Housing Starts
• Industrial Production
• Initial Jobless Claims