Hi there – 

It's hard to believe we're already at the end of the school year! Our kids are wrapping up finals this week, and like many families, we're looking forward to the summer break ahead.

It's been quite an eventful few months in the markets as well – following significant volatility spurred by trade policy earlier this year, we've seen strong market resilience, with the swift recovery from April lows highlighting the value of staying disciplined during uncertain times. Read on for some insights on current market conditions and how investment strategies continue to evolve with the changing landscape.

Best,
Joel

Economic and Market Summary: June 2025

1. Economic Overview:

The U.S. economy continues to demonstrate resilience despite periods of trade-related uncertainty. Following initial volatility around tariff announcements earlier this year, markets have shown signs of recovery, with recession expectations moderating to more reasonable levels. One area to monitor closely is job openings, which have declined from earlier highs. However, unemployment remains stable and new job creation continues, suggesting the labor market maintains its overall health.

Importantly, inflation expectations appear more manageable than initially feared. The Producer Price Index indicates that services deflation has more than offset any tariff pass-through price hikes in goods, suggesting the inflationary impact of trade policies may be more short-term than sustained.

Sources: BlackRock, Truflation year-over-year Consumer Price Index as of 5/15/2025, US Bureau of Labor Statistics as of 4/30/2025.

2. Current Market Positioning and Strategy:

Following the strong market performance from February through May, there has been a tactical shift toward reducing equity overweights. The approach reflects taking advantage of market strength to recalibrate risk while maintaining a slight equity overweight position.

Key positioning changes include:

• Equity Rebalancing: Reducing 3% equity overweight to 1%, taking advantage of the recent rally while building in resilience for potential volatility.
• Focus on Quality Growth: Continued emphasis on large-cap growth companies, particularly those with AI exposure and structural growth themes, where earnings growth meaningfully exceeds broader market rates.
• Regional Shifts: Moving from strong U.S. overweights toward more neutral international positioning, while reducing China underweights toward benchmark emerging market weightings.
• Growth vs. Value Balance: Adding value exposure while maintaining growth preference, supported by large-cap companies' stronger balance sheets and earnings resilience.

3. Fixed Income and Diversification Opportunities:

Fixed income positioning is moving closer to benchmark weightings with several strategic enhancements intended to capture global opportunities and provide portfolio resilience.

Strategic fixed income developments include:

• Global Bond Opportunities: International bonds present attractive prospects offering higher yields, with the expectation that foreign central banks may continue cutting rates faster than U.S. policy. In addition, this exposure utilizes currency hedge protection against exchange rate volatility. 
• Duration and Credit Adjustments: Modest increases in duration positioning and moderate credit exposure adjustments, representing a move toward more neutral allocation
• Inflation Protection: Addition of short-term inflation hedges to provide additional portfolio resilience

Sources: BlackRock, Bloomberg US Aggregate Bond Index, Global Aggregate ex-US 10% Issuer Cap Total Return Index Hedged, performance from 9/24/2024 to 5/15/2025. Federal Reserve fed funds rate and European Central Bank (ECB) deposit facility announcement rate, as of 5/15/2025. Index performance is for illustrative purposes only. Index performance does not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results.

4. Tariff Resolution and Economic Outlook:

Tariff expectations have evolved a great deal since the initial announcements that created market volatility. While final tariff levels are likely to be higher than pre-volatility levels, they appear to be moderating from the worst-case scenarios that many initially feared. This development has contributed to recession odds dropping to more reasonable levels.

The expectation is that tariff impacts on inflation will be more short-term rather than sustained, with other economic forces helping to offset potential price pressures. The broader economy continues to look healthy based on current fundamental data, supporting a more optimistic medium-term outlook.

5. Looking Forward:

Current market conditions suggest an environment where diversification and disciplined positioning continue to be rewarded. The market's swift recovery from April lows demonstrates the value of patience during periods of uncertainty, while the ongoing strength in large-cap growth earnings supports selective equity positioning.

The investment landscape appears to favor a balanced approach: maintaining a reduced yet slight equity preference while building in multiple layers of portfolio resilience through diversified fixed income, global opportunities, and quality equity positioning. As policy uncertainties continue to evolve, the focus remains on fundamental economic strength and long-term structural trends rather than short-term headline volatility.

These observations reflect our ongoing analysis of risk and opportunity in the current environment. As conditions continue to evolve throughout 2025, our approach will remain focused on balancing near-term resilience with positioning for the next phase of the economic cycle.

As always, please don't hesitate to reach out if you have any questions about current market developments or how they relate to your overall financial strategy. My priority continues to be helping you navigate these market movements while keeping your long-term financial plan on track.

Certus Wealth Management