Market Insights Recap — Week of June 16, 2025

Hello, I'm Steve Orr, Chief Investment Officer for Texas Capital's Private Bank. 

Well, it's back to video this week. Today, we'll do a quick run-through: event shocks, the Federal Reserve and the economy. How are these affecting our portfolios? What should we be doing? June's typically an ugly month for stocks. What should we be doing, if anything? June's typically an ugly month for stocks. There's an old saw, "Sell in May and go away," from times when Wall Street would decamp to the Hamptons for the summer. Not so true anymore. 

This June has defied expectations until Friday's war news. We've talked about the five current wars many times over the last several years. In our writing and speeches, the Israeli and Iranian conflict is floated between number two and number three in terms of priority. Now it's front page number one. Friday, oil was up 7% to around $73, suggesting a wait and see attitude. What about stocks? S&P was only up just over 1%, much less than you would think after the outbreak of a potentially major war. Events can rattle markets for a few weeks, but rarely change the trend, very important to remember. Don't expect the current stuck in neutral trend to change any. We've made back all of the tariff trauma tumble, and valuations are still rich. The economy's doing OK. Earnings are expected to grow about 5% this quarter. So our dashboard is saying no major adjustments to stock portfolios.

On to the Federal Reserve. They're open market committee meets this week. Recall, Trump called Fed Chairman Powell a numskull last Thursday for not lowering short-term interest rates. Hey, truth is, an absolute defense to defamation. But we're not going to engage in name calling. Powell has done a solid job steering a Fed that normally is blamed for moving too late. I think the Fed is on hold most of this year. Powell will give a policy speech in Jackson Hole in August that could set the stage for one cut possibly later in the year. But for now, the Fed has low unemployment and a lull in inflation for the last three months. They're going to feel fine about leaving rates alone, regardless of Trump's invective. 

So if you have cash or you need cash, money markets paying north of 4% earn a nice spread over inflation right now. And inflation is a constant issue in our economy. Low pump prices have helped pull CPI readings down to their post shutdown lows the last three months. The ramp up to the Israeli Iran war will take care of that. Expect next month's inflation reading to move higher thanks to crude oil concerns, but that should not keep the economy from posting probably 3% real growth this quarter. The economy is rolling along in first gear; some areas slowing a bit, some accelerating. Low unemployment, low inflation equals a happy-do-nothing Fed. Long-term interest rates are at reasonable levels for folks putting cash to work. We would wait until after the debt ceiling later this summer for total return investors.

So let's wrap it up. Wars jolt markets, but rarely change the trend. That's the case here. Everyone knew this was a case of when, not if. The economy continues to grind along in first gear. Inflation should tick higher in the coming months. But the Fed's on hold. We think they do not cut rates this year, if we stay in first gear. So let us know how we can help; 'til next time.