Weekly Macro Report, June 27 2025
1. Economic Growth & Outlook
The US economic growth showed a mixed trajectory in early 2025. Real GDP contracted by 0.5% annualized in Q1 due to rising imports, weaker government spending, and slowing consumer demand, despite increased investment and private services output. However, real final sales rose 1.9%, signaling underlying private demand resilience. The S&P 500 is projected to return around 10% in 2025, reflecting earnings growth amid moderation in inflation. The Fed’s effective funds rate remains elevated, with futures implying a cautious path forward, suggesting a balancing act between containing inflation and supporting growth. Overall, growth is expected to decelerate to around 1.4-1.5% this year, with downside risks from trade tensions and fiscal constraints persisting through 2025 and 2026.
2. Labor Market
The US labor market in the week ending June 21, 2025, shows mixed signals of resilience and softening. Initial jobless claims decreased to 236,000 from 246,000 the prior week, indicating fewer layoffs. However, the insured unemployment level rose to its highest since November 2021, with the insured unemployment rate steady at 1.3%. The overall unemployment rate remained unchanged at 4.2% in May but is 0.2 percentage points higher than a year ago. Nonfarm payrolls added 139,000 jobs in May, with growth concentrated mainly in healthcare, signaling a narrowing breadth of job gains. Together, these trends suggest a stable but increasingly fragile labor market as mid-2025 progresses.
3. Interest Rates & The Yield Curve
As of late June 2025, the US Treasury yield curve remains upward sloping with the 2-year at about 3.90%, 10-year near 4.38%, and 30-year close to 4.89%, reflecting moderate term premium and ongoing Fed rate normalization. Credit spreads show Aaa corporate yields modestly above Treasuries, with Baa bonds and 30-year mortgage-backed securities offering wider spreads, indicating cautious risk appetite amid economic uncertainty. The positive 10-2 spread (~0.44%) suggests no immediate recession signal, while elevated credit spreads point to selective credit risk concerns in the market.
4. Bond Market Insights
This week, the US bond market shows a modest steepening of the 10Y-2Y yield curve following recent Fed signals of potential rate cuts later in 2025, reflecting easing inflation concerns and expectations of a more gradual monetary policy normalization. Credit spreads (Baa-Aaa) remain relatively stable at tight levels, indicating steady credit conditions despite geopolitical tensions. Meanwhile, the real 10Y yield on TIPS remains slightly positive, suggesting that market inflation expectations are anchored but with cautious optimism. Together, these signals point to a cautiously improving economic outlook with moderate inflation pressures and a balanced risk environment as of late June 2025.
5. Inflation Dynamics
US inflation showed steady dynamics through May 2025, with the annual CPI rising modestly to 2.4%, driven mainly by shelter and food cost increases, while energy prices declined. Core inflation remained stable at 2.8%, reflecting persistent underlying price pressures outside volatile sectors. Producer prices also inched up slightly, indicating moderate input cost growth. Inflation expectations suggest a gradual easing ahead. This stable but modest inflation aligns with a global trend of decelerating inflation as supply chain pressures ease and monetary policies tighten worldwide.
6. Money Supply
As of early 2025, US M2 Money Supply YoY growth moderates around 3.6–3.9%, slightly above recent lows but below historical averages, reflecting restrained monetary expansion post-tapering of pandemic-era stimulus (March 2025: 3.85%). Meanwhile, CPI YoY inflation remains elevated but shows signs of easing compared to prior years. US GDP YoY growth stands at a modest 2% in Q1 2025, indicating moderate economic expansion. The money supply growth is somewhat aligned with economic growth but less expansive than during crisis periods. M2 growth is driven by the Federal Reserve's cautious easing and stable bank lending, balancing liquidity without overheating the economy. This restrained M2 expansion helps temper inflationary pressures despite persistent demand, supporting a controlled inflation environment in mid-2025.
7. Consumer Sentiment & Spending
US consumer sentiment rebounded sharply in June 2025, rising 16% from May to 60.5, its first gain in six months, driven by broad-based optimism across demographics and easing tariff fears. Expectations improved notably, reflecting greater confidence in business conditions and inflation easing, though sentiment remains below late 2024 levels. Meanwhile, the 10-year minus 2-year Treasury yield spread remains narrow, signaling cautious optimism but persistent recession risks. Together, these indicate consumers are cautiously regaining confidence amid still uncertain economic prospects.
8. Housing Market
The US housing market in June 2025 shows softening home price growth with Case-Shiller reporting a 2.7% year-over-year rise and a slight month-to-month decline, while new houses sold have median prices up 3% since last May but average sales prices rising modestly. Elevated mortgage rates near 7% continue to constrain affordability despite improving inventory, now at nearly 10 months’ supply for new homes. This mix sustains buyer-friendly conditions but keeps sales moderate amid affordability challenges and steady home prices.
9. Equity Markets Overview
This week through June 27, 2025, US equity markets, represented by the SPDR S&P 500 ETF Trust (SPY), showed continued moderate gains, with SPY rising about 0.78% on June 26, nearing all-time highs. Sector-wise, financials and utilities led the advance, supported by stable cash flows, rising interest rates, and dividend appeal, while technology underperformed amid rotation into more defensive names. Energy and consumer discretionary sectors also showed resilience, reflecting optimism about economic growth and AI-driven demand in energy infrastructure. Meanwhile, communication services and consumer staples lagged slightly in this mixed but bullish environment, signaling a cautious yet growth-oriented sentiment among investors.
10. Market Valuation
The S&P 500’s trailing P/E ratio stands around 27.8 in June 2025, above its 5-year average (~22-24), signaling elevated valuation levels. The Shiller CAPE ratio is even more stretched at about 37.5, nearly 1.5 times its post-1983 average of 24.5, reflecting extended long-term earnings valuation. Meanwhile, the Buffett Indicator (market cap to GDP) is near 211%, significantly above its historical trend, implying the market is strongly overvalued relative to economic output. Compared internationally, U.S. equities exhibit higher valuations than Europe and emerging markets, where fiscal stimulus and economic stability boost fundamentals more attractively. Drivers behind U.S. premium include dominant tech growth, profit margins, and low interest rates, while international markets benefit from improving geopolitical conditions and stimulus. This divergence coincides with 2025’s international stock outperformance versus the U.S. Overall, elevated U.S. valuations amidst broader global opportunity point to cautious positioning for investors.
11. Market Internals
This week, US market internals show subdued volatility with the VIX near 17, close to its 2025 lows despite recent geopolitical shocks, indicating contained investor anxiety as of June 25[6][8]. Growth stocks and momentum factors continue to outperform, driven by strong fundamentals, while value lags amid cyclical sectors’ elevated valuations versus defensives[2][5]. Small- and mid-caps remain weak, reflecting cautious risk-on sentiment. Overall, market breadth is mixed, suggesting a cautious but stable environment heading into Q3.
12. Global Equity Performance
Global equities showed mixed performance in the week ending June 26, 2025. The MSCI USA index maintained relative strength versus other developed markets as reflected by a stable MSCI USA/World ratio, underscoring continued investor preference for U.S. large caps. European markets like Germany and the UK lagged slightly, while emerging markets exuded some resilience, supported by gains in India and Brazil. However, broader global equity returns remained modestly negative year-to-date, with the MSCI World index down about 3.9% in 2025. The MSCI EM/World ratio hints at moderate emerging market outperformance versus developed markets, balanced by ongoing global macro uncertainties.
13. Commodities
This week’s commodity trends show gold maintaining strong year-on-year growth despite a slight daily dip, reflecting ongoing safe-haven demand amid moderate volatility signaled by the Gold/Oil ratio’s correlation with the S&P 500 VIX. Crude oil prices edged up slightly after recent declines but remain below early 2025 levels, consistent with steady global supply growth. The elevated Gold/Silver ratio parallels a stronger US Dollar Index, indicating cautious investor sentiment. Meanwhile, the Copper/Gold ratio aligning with modest 10-year Treasury yields suggests tempered expectations for economic expansion as of late June 2025. Combined, these signals point to a cautious but opportunistic market environment with selective risk appetite.
14. Digital Assets
This week, the crypto market shows mixed signals with Bitcoin maintaining strength above $100,000, exhibiting a relief rally and bullish momentum supported by rising RSI and moving averages through June 25–27, 2025. However, Ethereum struggles with volatility, falling to the low $2,000s amid geopolitical tensions, causing capital to rotate from altcoins to Bitcoin, which has increased dominance to 64%. On-chain metrics indicate stable Bitcoin network activity, while Ethereum sees reduced liquid supply through increased staking. Trading volumes have declined about 9%, signaling cautious investor sentiment. Overall, capital flows suggest Bitcoin remains the preferred safe-haven, with Ethereum under pressure but supported by institutional buying and staking growth, pointing to a consolidating yet cautiously optimistic market outlook.
15. Currencies
This week ending June 27, 2025, the US Dollar Index (DXY) dipped to a 3.5-year low near 97.50, reflecting a 2% monthly decline amid rising market expectations for Federal Reserve rate cuts due to easing inflation and caution over Fed independence. Major pairs showed mixed trends: EURUSD gained modestly, testing key resistance around 1.17–1.19, while USDJPY remained range-bound with bearish bias near 1.40–1.35. GBPUSD hovered near supply zones, signaling limited upside, and AUDUSD showed seasonal strength, approaching a critical resistance at 0.6550. These currency shifts suggest softer USD pressure, potentially easing funding costs globally but raising concerns over US capital flows and inflation import dynamics. Central banks may adopt more accommodative stances, while global trade benefits from a less dominant dollar, supporting commodity exporters and trade rebalance.
16. Debt Levels
As of mid-2025, the U.S. federal debt stands at approximately 120-124% of GDP, reflecting a high and rising trajectory since the pandemic peak of over 130% in 2021. Corporate and household debt levels, while somewhat lower than federal debt, remain elevated relative to historical norms, contributing to total private debt burdens near or above 80% of GDP. The interplay of these debt segments indicates substantial leverage across all sectors, heightening vulnerability to economic shocks and interest rate increases. Compared internationally, the U.S. exhibits among the highest federal debt-to-GDP ratios, exceeding countries like Germany or Japan, driven by persistent deficits and expansive fiscal policies, while private debt levels are comparatively moderate. This combined debt load constrains policy flexibility, raising refinancing risks and potentially slowing growth. For investors and policymakers, rising debt amplifies risks of credit rating downgrades and inflation pressures but also presents opportunities in government securities amid steady demand for safe assets. Vigilant fiscal management and structural reforms will be crucial to maintain stability and support long-term growth.
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