Weekly Investment Perspective

Despite increasing consumer pessimism over inflationary impacts of tariffs, simmering conflicts in the Middle East, and continuing political volatility, the major markets were all up for the week. NASDAQ led the week with an increase of 4.25%. The MSCI AC World ex US was up 3.05%. The S&P 500 and the Dow Jones were up 3.45% and 3.83% respectively. Meanwhile, Treasury yields dropped across the board with the U.S. 10-year Treasury yield ending the week at 4.28% from 4.38% in response to softening economic data.

The Conference Board’s June Consumer Confidence Index dropped sharply to 93.0 from 98.4 in May, erasing nearly half of May’s strong rebound. Both current conditions and expectations components contributed while incomes and business outlook both deteriorated. The expectations sub-index plummeted to 69, remaining well below the recession warning threshold of 80. Notably, this downturn was broad based across age, income, and political groups. Trade uncertainty & tariffs remain top concerns among consumers. Geopolitical tensions, while less frequently cited, are gaining traction. Inflation worries persist, although near term inflation expectations have eased a bit. Consumer caution remains elevated. Consumption weakness, shown in the May PCE report hard data, is starting to reflect the negative survey data. Household spending and borrowing are likely to stay restrained, making consumer driven equity exposure more selective in the near term.

May’s durable goods report posted a spectacular +16.4% monthly gain which was the biggest jump in over 11 years. This was almost entirely driven by commercial aircraft orders, which surged roughly 230–231%, including 303 orders for Boeing alone (only 8 in April). However, excluding the volatile transportation sector, core orders rose a modest 0.5%, with non defense capital goods rising 1.7%. The surge in aircraft bookings is good news, but it masks the tempered pace of broader business investment. Persistent tariffs and policy uncertainty mean most firms continue to take a cautious "wait and see" approach to capital expenditures.

May existing home sales come in slightly above forecasts, but underlying trends remain weak, with the highest months supply on record since 2016. The combination of elevated mortgage rates and what appears to be "softening" in the labor market continues to pressure buyer sentiment. We are unlikely to see a durable rebound until interest rates meaningfully drop or incomes and hiring regain momentum.

Middle East tensions have receded slightly, giving a momentary reprieve to oil price volatility. But Oxford Economics warns that any flare ups could quickly trigger “lower confidence, higher energy prices, tighter financial market conditions, and supply chain disruptions”. Market volatility (VIX) has stayed elevated over the past two weeks, reflecting this risk premium.

The June jobs report comes out as the most critical data point this week. The consensus is looking for +117.5k nonfarm payrolls vs. 140K last month. We will watch for signs of consumer rebound or policy pivot. Tariff developments will also be closely monitored in the week ahead as July 9th marks the end of the 90-day pause in reciprocal tariffs announced on Liberation Day. The White House has hinted that the timeline may be extended, especially for countries where trade talks have been productive. We want to remind everyone that this is a holiday shortened trading week. We hope all of you have a safe and happy 4th of July.

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