The Month in Review

Month ending June

Monthly Highlights
  • In 2025, investors are learning the cost of macro uncertainty—volatility
  • Fixed income markets held firm in June and credit markets proved resilient
  • Equities were also resilient amid a busy month of geopolitical tensions
Macro & Rates

In 2025, investors are learning the cost of macro uncertainty—volatility. While the overall fiscal policy shift could turn out to be a positive supply shock, it must first get through the short-run challenges of sequencing the policy changes (tariff implementation occurs before tax legislation or de-regulation). Thus, the impact so far has been a drag as tariffs weigh on growth, while the stimulative aspect of tax cuts and deregulation are still to come.

 

On the economic front, inflation edged up to 2.4% in May compared to a year ago, according to data from the Bureau of Labor Statistics. That was slightly higher than its 2.3% reading in April. The US labor market added 147,000 jobs in June, according to data from the Bureau of Labor Statistics. However nearly half of that total came from the public sector. The unemployment rate, which is based on a separate survey, fell to 4.1%—mostly due to a contraction in the labor force.  

 

Nonfarm payrolls, change in thousands 

Sources: Bureau of Labor Statistics, Moody's Analytics. Data as of July 2025.  

 

Core Bonds

Fixed income markets held firm in June ahead of the next round of tariff deadlines which were previously scheduled for July 9.

 

Treasury yields fell steadily during the month, with the 2-year yield ending at 3.72%, down 18 basis points (bps). Futures markets reflected an expectation for incrementally more Federal Reserve interest-rate cuts in 2025, from two at the start of the month to slightly fewer than three by month-end.

 

Credit markets proved resilient as spreads continued to retrace the widening in February through April. The Bloomberg US Credit Index closed June with an OAS of 79 bps, 4 bps lower on the month. Spreads were confined to a relatively narrow band of 79 to 84 bps OAS in June. The index’s YTW finished the month at 4.93%, 22 bps lower and its lowest level since October 2024. Investment grade corporate supply was relatively heavy in June, totaling $116 billion, and pushing year-to-date gross issuance 5% heavier than 2024’s pace through the halfway point. 

 

Equities

The major US indices remained resilient over what was a busy month of heightened geopolitical tensions, with all of the major indices on the following page delivering solid gains amid ongoing global tariff developments and escalating unrest in the Middle East. 

 

June saw the US and China continue to de-escalate in trade rhetoric, with markets reacting positively to the US announcing a framework for a trade deal that would see the lowering of tariffs and easing of other restrictions. This positive development was temporarily offset by a worrying escalation in the Middle East.

 

Overall, it was the tech-heavy Nasdaq which led returns among the major indices during the month, driven by renewed investor enthusiasm for the “Magnificent Seven” cohort and a strong rebound in artificial intelligence (AI)-related stocks following what had been a weaker start to the year. The small-cap focused Russell 2000 followed closely behind. The broader S&P 500 also delivered strong gains, with information technology and communication services among the top-performing sectors. In contrast, consumer staples was the only sector in the red over the period.   

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