Week of June 30, 2025

Key Points for the Week

• Stocks had another great week, closing at a new all-time high on Friday for the first time since February 19. This means that the stock market has not gained anything between February 19th and Friday.
• After being down nearly 20% at the April lows, this was one of the quickest rebounds in history.
• The good news could continue, as July historically is one of the best months of the year and when June and July are both higher, the final six months have usually increased as well.
• The Case-Shiller Home Price Index fell for the second month in a row in April amid rising inventories, high mortgage rates, and falling affordability.
• Household balance sheets remain in good shape with relatively low borrowing, high home equity levels, and an added boost from a strong stock market.
• Strong household balance sheets will help mute the impact of home price declines, but balance sheets are becoming increasingly tied to stock market performance.

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Current Trends & News is a weekly financial recap curated by SPC Financial®'s team of wealth management and tax-integrated advisors. We monitor and explore the intricacies of the financial world and share insights into market developments.

Economic Update

In a remarkable recovery from April's double-digit downturn, the Standard & Poor's (S&P) 500 Index raced to a new record high last week, and so did the Nasdaq Composite Index (Nasdaq). Key drivers behind the ascent included:

Investor optimism. Last week, the “Bull and Bear” investor sentiment indicator rose to its highest level since last November, reported Martin Baccardax of Barron's. Easing of tensions in the Middle East lifted investor optimism. As the region settled, oil prices moved lower, quelling concerns that rising oil prices would push inflation higher.

Consumer sentiment. The University of Michigan's Consumer Sentiment Index improved 16 percent in June, although it remained 18 percent below December's reading. Expectations for personal finances and business conditions improved.

“Consumer views are still broadly consistent with an economic slowdown and an increase in inflation to come."

Joanne Hsu, Surveys of Consumers Director

Muted inflation. It was widely expected that higher tariffs would mean higher inflation. So far, that hasn't been the case. In May, U.S. government revenue from tariffs surged to a record high, reported Jarrell Dillard of Bloomberg, and consumer prices remained relatively steady. The Personal Consumption Expenditures (PCE) Index showed core inflation, which excludes volatile food and energy prices, rose 2.7 percent year over year. That was slightly above expectations, reported Nicole Goodkind of Barron's.

Trade optimism. While concerns remain about the impact of tariffs on inflation, investors gained confidence that the outlook for trade is improving.

“Trump administration officials have recently softened the focus on the self-imposed July 9 deadline for deals. On Friday, Treasury Secretary Scott Bessent [said] he hoped to have trade wrapped up by Labor Day and described the latest pact with China as de-escalatory.”

Reshma Kapadia and Elsa Ohlen, Barron's

While current market momentum is impressive, “Some market watchers are cautioning that valuations are looking lofty, and that the S&P 500 would need an earnings boom or drastic Federal Reserve interest-rate cuts to justify current levels.”

Natalia Kniazhevich, Bloomberg

U.S. stocks faltered on Friday after an announcement that trade negotiations with Canada would not take place, reported Karishma Vanjani of Barron's. However, the S&P 500 and Nasdaq still finished the week at record highs. Yields on longer maturities of U.S. Treasuries moved lower over the week.

This Week in the Markets

Friday marked the 1,245th new all-time high for the S&P 500 since 1957 (when it became 500 stocks). This means there's a new high about 7.2% of all days or once every 14 trading days. That is pretty much a new high every three weeks, give or take, and they tend to come in rough clusters that can last years or even decades.

In other words, there are always worries out there and reasons to be fearful, but new highs just are not one of them. As we show below, new highs happen more often than you probably realize, and they are perfectly normal.

July Is a Strong Month

After gaining nearly 6% in May, for the best May since 1990, the S&P 500 is following it up with a very solid June (with one day to go the index is up more than 4%). The good news is July tends to be a very strong month for stocks and we don't think this year will be any different, as this surprise summer rally continues.

In fact, July is the very best month of the year in a post-election year, the second best the past 10 years, and again the best over the past 20 years.

July has been higher an incredible 10 years in a row, only one away from tying the longest July win streak ever from the '40s and '50s.

July does better when May and June are higher, but it is the final six months that really stand out, as these months have finished higher an incredible 15 out of the past 16 times and up nearly 9% on average (in half a year).

Home Prices

The Case-Shiller National home price index fell 0.4% month over month in April, the second consecutive month of declines following the 0.3% decline in March. Note that the Case-Shiller index is a three-month average, and so the April index prices are an average of February, March, and April. That means the actual monthly decline in April alone is larger than the three-month average.

The national home price index is now up 2.7% over the last year, which is below the 3.4% expected. A year ago, home prices were up 6.4%, and back in December prices were up 4% trailing year, so this is a sharp deceleration and it's about rising inventories. Inventories were the reason why prices rose in 2023-2024 despite falling home affordability. Inventories were low, and that drove prices higher. That is no longer the case.

Looking at the top 20 cities, prices rose in just four of them, mostly in the Midwest (Cleveland, Detroit, Chicago) and New York. A couple of cities are now seeing a year-over-year price drop (Tampa (-2.2%) and Dallas (-0.3%)). You are seeing a sharp deceleration in the year-over-year pace from one year ago (April 2024) across the board, with San Diego, Miami, LA, Tampa, and Charlotte topping the list.

Prices are more than 2% off their peak levels in 8 of the 20 cities, with San Francisco seeing prices 7.5% below peak levels, followed by Denver (-2.8%) and Tampa (-2.7%).

Inventory Rising and Home Prices Easing

Higher home prices are good for homeowners unless you want to move to another home (because that home is also more expensive) with a higher mortgage rate. Of course, this can go on for only so long. If you must move, you must move, and this year we are starting to see supply increasing. The inventory of existing homes (which widely outnumber new homes) is at 1.54 million as of May 2025, up 20% from a year ago. Inventory is still low relative to history, and is down 12% from average 2019 levels.

However, if you normalize inventory by sales (months of supply at the current sales pace), inventory looks normal. The current month of supply is now at 4.6, which is in the normal range of 4–6 months of supply.

Rising inventory, and normalization, is why home prices are now pulling back. Home prices have historically been inversely correlated with inventory levels. Over the last 25 years, we have seen that as inventory pulls back, home prices generally rise, and as inventory rises, home prices ease.

In addition to more supply, demand has been falling. No surprise that it is being driven by low affordability due to higher home prices and higher mortgage rates. Here is a comparison of monthly mortgage payments at different times, assuming 20% down, prevailing mortgage rate, and median home price:

• Jan 2021: $990
• Jun 2022: $1,880
• Jun 2024: $2,250
• May 2025: $2,210

Affordability has hardly improved over the last two years. Keep in mind that in 2021–2022, wage growth was running around 5–6%, but that's pulled back to below 4% now (using the Employment Cost Index). Meanwhile, mortgage rates have gone in the other direction. Also, the median home price has increased by 49% over the last five years.

Housing, or residential investment, makes up just 4% of GDP, but it's amongst the most cyclical parts of GDP and can drive changes in GDP growth (up or down). Also, keep in mind that homes are important even beyond the direct impact on GDP growth via new building. It also drives household formation and is an important source of wealth, especially for lower income groups.

However, we now have a potentially toxic combination of:

• High interest rates, with mortgage rates running close to 7%
• Extremely poor home price affordability
• Rising home inventory and a pullback in home prices
• A weakening labor market, with easing wage growth (running well below mortgage rates)

This is not to say we will get an immediate economic crash, but there is a slow burn happening, with risks increasing. It is worth discussing how large these risks are (or are not).

Consumer Balance Sheets in Good Shape

Below is a chart showing how consumer balance sheets are in really good shape (in aggregate). As of 2025 Q1, net worth as a percent of disposable income is 740%, up from 688% at the end of 2019.

There are 3 reasons for the increase in household net worth over the last five years. First, lower debt. Liabilities as a percent of disposable income has dropped (thanks to low mortgage rates in 2020–2021) to 93%. It was 101% at the end of 2019, and 137% just before the financial crisis in 2007. That's one reason why the 2008–2009 recession was as bad as it was—households were much more levered and when unemployment rose and home prices fell, everything crashed.

Second, rising home prices. Real estate assets are now at 215% of disposable income. That's up from 183% at the end of 2019, and close to the 219% we had back in 2007, except now it's happened without households taking on as much leverage.

Third, rising stock prices. Equity holdings as a percent of disposable income is at 250%. That is up from 210% at the end of 2019, and 160% in 2007. Even at the height of the dot-com bubble in 1999, equity holdings as a percent of disposable income were 160%. Note that this is somewhat offset by a falloff in defined benefit pension entitlements, from 99% in 2019 to 73% in 2025 Q1.

Will Falling Home Prices Hit Consumers Hard?

There are really two questions here that need to be answered to understand how much consumer balance sheets could potentially be hit by falling home prices.

First, assuming home prices fall, how much will they fall? As discussed above, inventory is rising, which is why there's downward pressure on home prices. Demand is also down amid poor affordability, but supply is also relatively low. That should prevent huge home price declines, like the kind we saw back during the housing crash. The Case-Shiller National home price index declined by a cumulative 26% between 2007 and 2012—it's unlikely we see anything of that magnitude in this cycle.

Second, how levered are households? The greater the leverage, the harder the crash (like in 2008-2009). As noted above, aggregate liabilities as a percent of disposable income are running at the lowest levels since the late 1990s. This is not to say there will not be a hit to consumer balance sheets, but the impact is likely to be less, especially if home price declines are on the milder side.

Keep in mind that households already have a significant amount of home equity, not to mention the fact that most households (at least those who bought or refinanced prior to 2022) have mortgage payments less than 8-12% of household income (on average). Mortgage service payments (and mortgages are the bulk of household liabilities) are running less than 6% of disposable income. That is below what we saw in 2019, and that came at the end of a deleveraging cycle when households were trying to rebuild their balance sheets after the Great Recession (when stocks and home values crashed).

What could upset the apple cart? A bear market

A bear market, and especially a sustained one, would be extremely detrimental to household balance sheets. As discussed above, the biggest driver of net worth over the last five years has been rising stock prices. Some of this has gone to offset the fact that defined benefit pension plans have greatly declined, with business focusing more on defined contributions to retirement accounts instead. Equities make up over a third of net worth as a percent of disposable income.

It also means that a sustained bear market could send things the other way. All this feeds on itself, and we could end up in a vicious cycle of:

• Rising unemployment ->
• Falling aggregate income ->
• Lower spending ->
• Lower profit growth, if not an outright decline ->
• Bear market ->
• Weaker household balance sheets (including from falling home prices) ->
• Lower spending ->
• Lower revenues and hiring -> Back to top

Once the process starts, it can feed on itself. An external catalyst is needed to put sand into the gears of this negative feedback loop so it cannot get going, whether it is rate cuts (which should boost housing earlier than any other sector) or fiscal support.

How Affordable Are Homes in the United States?

The Federal Reserve (Fed) is the central bank of the United States. It is made up of twelve district banks that are supervised by a Board of Governors. Basically, the Fed oversees banks, protects consumers, and keeps our financial system stable.

It's also responsible for keeping the U.S. economy healthy by making sure:

• People are working (maximizing employment) and
• Price increases are low (stabilizing inflation).

How does the Fed support the economy?

The Federal Reserve's Open Market Committee (FOMC) meets eight times each year to decide whether – and how – the Fed should influence the economy.

For example, when prices rise rapidly, the FOMC lifts the federal funds rate. As the federal funds rate move higher, banks raise the rates they charge for loans and credit cards, and people begin to spend less. Demand for goods slows, and prices move lower.

When the federal funds rate increases, bond rates perk up, too, which can be challenging for investors who own bonds with lower interest rates. That's because there is an inverse relationship between bond prices and bond rates. When rates rise the value of bonds with lower rates declines. On the other hand, investors have an opportunity to purchase new bonds that deliver a higher level of income, explained Nick Lioudis on Investopedia.

In contrast, if the economy shows signs of weakness – rising unemployment, slowing economic growth, flagging consumer confidence – the FOMC may lower the federal funds rate to stimulate economic growth. When the federal funds rate drops, so do the rates banks charge on loans and credit cards, making it cheaper for people and companies to borrow. Usually, as spending increases, economic growth accelerates.

Falling federal funds rate also means the rates on newly issued bonds will be lower. Typically, that makes bonds with higher rates more valuable.

Last week, the FOMC met and left the federal funds rate unchanged. The decision had little effect on markets because investors didn't expect the Fed to change rates. What interested investors was the Fed's outlook for 2025, reported Jeff Cox of CNBC. The Fed's Summary of Economic Projections showed that FOMC members expect employment to remain relatively steady, inflation to rise, and economic growth to slow. In addition, collectively FOMC members expect two rate cuts by the end of the year.

FBI Warns of Suspicious Text Message Scams

The FBI has issued a warning to 150 million Apple and Android users to be aware of malicious text messages being sent to their phones. The text message scam warns individuals of significant consequences if outstanding bills or fines are not paid immediately. The messages currently include unpaid tolls and newer DMV traffic offenses, but will eventually mimic texts from bank and credit card companies, per the FBI. The FBI reported that there was an 800% increase in fraudulent DMV-themed texts in the first week of June alone.

Not only are the cybercriminals impersonating a DMV, but they are also impersonating law enforcement officials, demanding payment for fines or missed court appearances to avoid arrest.

“Scammers always prey on people's fears. They are always opportunistic. They try to ratchet up that sense of urgency so that you do not think about what you are doing and then send the money.”

Spokesperson from the FBI

If you receive a suspicious text message, the FBI and other agencies suggest that you do not click any link the message contains and to delete the message immediately.

A Reminder About Scams

Scams usually start with a phone call, email, text, or another form of communication. The person typically claims to be from an agency or organization you know – or one that sounds like it might benefit you, such as the National Sweepstakes Bureau or a lottery.

The person may know your name and address. They may give you their official title or an identification number. No matter how official they seem, you can be confident it is a scam if the person contacting you:

• Indicates there is a problem with your benefits.
• Asks you to pay to receive a prize.
• Suggests that paying will increase the chance of winning.
• Requests financial information, such as a bank account or credit card number.
• Pressures you to act immediately.
• Tells you to pay using a specific method, such as a gift card or cryptocurrency.

If this happens, remember that the Social Security Administration, the Internal Revenue Service, Medicare, and your bank do not call, email, or text to ask for money or personal information. They do not demand that you pay immediately, and they do not accept payment by gift card, prepaid debit card, cryptocurrency, or another untraceable form of money transfer.

When you suspect a scam:

• Hang up or close the message. Do not respond in any way.
• Remain calm.
• Think back over the call. Write down any personal information you may have inadvertently shared.
• Report the scam. Contact the Federal Trade Commission at ReportFraud.ftc.gov. You may also want to report the incident to your state's attorney general or your local consumer protection agency.
• Share your knowledge. Talk with family, friends, and neighbors about your experience so they know what to look out for.

When you receive a digital message, no matter how official it seems, do not click on any links. Do not give or confirm any personal information, including your name, birth date, phone number, address, email address, place of birth, driver's license, passport, or Social Security numbers, bank or other account numbers, and PIN numbers.

Being skeptical can keep you safe. Remove yourself from the situation. Do not share information. If you feel anxious and need to confirm that it was a scam, contact the organization using a method provided on their official website.

Did you Know? This Week in History

July 2, 1977: “Gonna Fly Now (Theme from 'Rocky')" is #1 Song on U.S. Pop Charts

On July 2, 1977, Hollywood composer Bill Conti scored a #1 pop hit with the single “Gonna Fly Now (Theme from Rocky)."

Bill Conti was a relative unknown in Hollywood when he began work on Rocky, but so was Sylvester Stallone. Conti had gained some attention internationally with his work on several early 1970s Italian films, including Vittorio de Sica's Academy Award-winning Il Giardino dei Finzi-Contini, and Stallone had starred in a small film called Lords of Flatbush and played various minor roles in movies and on TV. It was Rocky that would truly launch both men's careers, though. The film was Stallone's from start to finish, but it is difficult to overstate the importance of his collaboration with Conti. Though Conti took his inspiration from Stallone's footage, Stallone had the film's critical training and fight sequences edited to fit Conti's music, and the interaction between picture and music in Rocky made an enormous contribution to the movie's success.

The single "Gonna Fly Now” takes its name from the almost-superfluous 30 words of lyrics written by Ayn Robbins and former Teddy Bear Carol Connors. Though it lost the competition for Best Original Song at the 49th Annual Academy Awards to Barbra Streisand and Paul Williams' “Evergreen (Love Theme From A Star Is Born),” it has remained an instantly recognizable piece of American pop culture.

Weekly Focus

"The limits of my language mean the limits of my world.”

Ludwig Wittgenstein, British Philosopher

"Those who make the worst use of their time are the first to complain of its brevity.”

Jean de La Bruyère, French Philosopher