By Rick Schwerd | June 20, 2025
Our investment team remains committed to sharing updates and market insights to keep you informed. Please look for our next update on July 11.
Markets Prove Resilient
The stock market has been relatively flat over the last two weeks, which is somewhat surprising given the geopolitical turmoil, subsequent oil market volatility and mixed economic data. Markets responded positively to last week’s benign inflation data. However, last Friday, markets sold off following Isreal’s initial attacks on Iran and Iran’s military response. Markets gained back many of the losses on Monday as markets had more time to digest the news. The major indexes hovered in a narrow range the rest of the week, absorbing retail sales data, housing data and continued Middle East uncertainty without major price swings.
The S&P 500 is currently just below 6,000 and is up nearly 2 percent this year. The tech-heavy NASDAQ is up 1.25 percent year-to-date and has gained 10.5 percent over the last three months, wiping out a significant negative start to the year. The benchmark 10-Year U.S. Treasury remains range bound, sitting at 4.43 percent.
Fed Keeps Rates Unchanged
Following their June Open Markets Committee meeting, the Federal Reserve announced that they had left rates unchanged at a range of between 4.25 and 4.5 percent. Officials indicated they expect inflation to rise to 3.1 percent this year, which is currently at approximately 2.4 percent. They projected the unemployment rate, at 4.2 percent in May, would creep up to 4.5 percent by the end of the year. They continue to predict two quarter-point cuts before the end of the year.
President Trump has repeatedly chastised Fed Chairman Jerome Powell for keeping rates elevated even though the President’s tariff policy is largely viewed as creating uncertainty in economic growth and inflation expectations. This uncertainty plays a role in keeping the Fed on the sidelines currently. The President has pointed out that lowering interest rates would save the government hundreds of billions of dollars in interest payments associated with servicing the national debt and contributing to higher deficits. Elevated short-term interest rates also inhibit economic growth by increasing borrowing costs for individuals and businesses.
Economic Data Softens
Tuesday’s release of May retail sales data was disappointing. Retail sales were down 0.9 percent month-over-month, a larger drop than anticipated. Part of the drop was due to a giveback of the surge we saw in March as buyers rushed to beat the anticipated April tariff announcements. However, the large drop may also point to an overall softening of retail demand.
We also continue to see anemic housing data. May housing starts came in at 1.256 million, the lowest level since May 2020, which was right at the start of the pandemic. May building permits, which provide a view of future activity, came in at a disappointing 1.393 million, the smallest number since June 2020. In the same vein, the June National Association of Home Builders Index came in at 32, a level not seen since December 2022. High prices and elevated mortgage rates continue to weigh on the housing market. Home purchases and all the economic activities related to homebuying are a major driver of the U.S. economy.
As mentioned above, last week’s inflation data was positive, although it does not point to a stronger economy. The headline Consumer Price Index (CPI) came in at 2.4 percent, slightly below expectations. The Producer Price Index was also benign. It remains expected that we will see an uptick in inflation over the next few months as higher prices due to tariffs filter into the economy. The effects of tariffs on inflation should be short-term in nature and should not produce an on-going, upward trend.
As always, if you have any questions or concerns regarding markets or your financial planning needs, please reach out to us at (518) 415-4401.
About the Author: With almost three decades of financial industry experience, Rick serves as a Senior Investment Officer at Arrow Bank, formerly named Glens Falls National Bank and Saratoga National Bank. He oversees individual and corporate retirement plans, personal trusts, investment management accounts, foundations and not-for-profit relationships.