Week in Review: June 20, 2025

June 23, 2025

Recap & Commentary

Markets ended the week little changed as investors watched events in the Middle East unfolded and the Fed left rates unchanged following its June Federal Open Market Committee (FOMC) meeting.

While the Fed’s decision was widely expected, investors were still keen to review the Fed’s updated “Dot Plot” forecast showing committee members’ expectations for future rate cuts. Reflecting the continued uncertainty stemming from President Trump’s trade policies, the Fed’s year-end Fed Funds projection remained unchanged at 3.9%. Speaking at his post-meeting press conference, Fed Chair Jay Powell described current policy as “well positioned” to respond to economic developments. Powell also noted the “pretty health diversity of views” on the Committee.

Illustrating that diversity of views, on Friday, Fed Governor Christopher Waller said he would be supportive of cutting rates at the Fed’s July FOMC meeting. “I’m all in favor of saying maybe we should start thinking about cutting the policy rate at the next meeting, because we don’t want to wait till the job market tanks before we start cutting the policy rate,” Waller said.

Advocating for a more patient approach, San Francisco Fed President Mary Daly said she would be inclined to wait on a rate cut until the fall. “So I think unless we saw a faltering in the labor market that was meaningful, and we thought it would be persistent, then I would say the fall looks more appropriate,” Daily said.

Over the weekend, the US military unexpectedly bombed three of Iran’s nuclear production facilities. In response, Iran announced it intends to close the Strait of Hormuz, a six-mile-wide opening in the Persian Gulf between Iran and Oman through which ~20% of global oil supply passes.

Economic Commentary

Consumers pulled back on spending in May as evidenced by retail sales which fell for the second consecutive month, declining 0.9%. A 3.5% decline in motor vehicle sales weighed on the headline figure as the rush to beat potential tariff-induced price hikes receded. Consumers also pulled back on eating out, with food services sales falling 0.9%. Core retail sales used in the calculation of GDP, and which exclude more volatility categories such as autos, gasoline, building materials, and food services, rose 0.4% for the month. The data suggests that while consumers are perhaps being more prudent with their purchases, they continue to spend.

Housing starts fell to a five-year low in May as elevated mortgage rates and uncertainty took their toll on the sector. The decline reflected builders responding to slowing demand which, coupled with rising inventories, has led to houses sitting on the market for longer periods of time. According to the National Association of Home Builders, in June, 37% of builders cut prices to boost sales. Building permits, which are viewed as a forward indicator of future building activity slumped to their lowest level since June 2020 reflecting the more cautious mood of builders.

Of Note

Senate leaders expect to bring their version of the budget bill, widely referred to as President Trump’s One Big Beautiful Bill, to the floor for a vote this week, with hopes that a final version can be presented to Trump before July 4.

Market Indices (As of 06/20/2025)

• Core PCE Inflation
• Manufacturing & Services PMI
• Existing Home Sales
• New Home Sales
• Personal Spending & Income
• Consumer Confidence
• Durable Goods Orders
• Initial Jobless Claims