Rise Advisors Market Update
Rise Advisors Market Update
June 24, 2025
Transcript Below
Hi everybody, this is Zach Harrington from Rise Advisors and I want to take a moment to thank you for watching our market update for what is June of 2025. A lot continues to happen here in the world of capital markets and I think it's really important as always to make sure that we look at what has taken place, where we're headed, and if any, what portfolio considerations you should look at when it comes to your investment allocation as part of your overarching financial plan. So the last time we met was right around the time of tariff tantrum 2.0. We sent out a market video basically explaining that this kind of market uncertainty was expected. What moves asset prices is shocks. And what took place on April 2nd with Liberation Day, as we noted in that video in April, was certainly a shock to the system.
So on April 2nd, the US announces massive reciprocal tariffs to virtually all countries and then a 10% flat tariff to every single trade partner that we have. Equity and bond markets experience a velocity of selloff that we haven't seen since the peak of uncertainty relative to the COVID pandemic. One of the things we noted though during that previous video was that we already saw this playbook. In late late June of 2018, Trump began the trade war with China and over a six or seven month period going into year end markets sold off approximately 20%. But by May of 2019, markets had recovered completely. So our message was as always, control the controllable. Focus on what you can do within your financial plan and give markets a chance to recover. That's exactly what they did. On April 9th, the US announces a pause on all the reciprocal tariffs.
They did keep the 10% flat tariff in place, but by early May markets had recovered almost all of the liberation day losses. The US for the last 45 days has been engaging in good faith negotiations and for all intents and purposes it seems like some of these reciprocal tariffs for countries willing to negotiate with us are going to remain kind of on pause for now until new trade deals get negotiated. When it comes to trade expectations moving forward, I tend to think with this administration, let's just focus on what Scott Bessent says. So director of the Treasury, Scott Bessent seems to be the number one person within this administration who the market likes to hear from. And this headline from June 11th last night around 6:00 PM Bessent floats extending tariff pause for countries in good faith talks. And that's exactly our expectation. So for the trade partners who are in the process of negotiating, they're going to continue these pauses. In all likelihood why this is important. Trade deals take a really long time to implement. This isn't something that just happens overnight. We saw this with the UK trade deal. So the United Kingdom announces a trade deal with the United States in mid-April and it's a framework, it's just a agreed upon principle of what they're
Going to accomplish. And then the negotiation and the actual drafting of the deal goes into place. These can take months if not years to be implemented. And so I think it's a really good sign for the market that the logic of continuing these extensions makes a lot of sense. Now that tariffs or the noise around tariffs seem to have kind of been pushed to the back burner. This is seen when basically the tariff news of the China framework and deal doesn't really move markets. We're back to our regularly scheduled programming. Our regularly scheduled programming is that the Federal Reserve continues to keep rates at pretty high levels, at least comparatively to where they have been the last two decades, and they continue down this dual mandate path that they're battling against. The executive branch on the Fed believes that as long as inflation remains sticky, which is subjective, and as long as the employment market remains resilient, they can keep rates where they are.
We have talked about ad nauseum at this point over the last couple of years that we don't feel that the employment market is as strong as the Fed may feel. So a lot of the employment market was previously driven by government hiring and government contract hiring, and that segment of the market seems to have really slowed down labor wise and private payrolls continue to really struggle. Inflation remains pretty low and as M two money supply has contracted within the economy and as things have normalized, as has inflation. So in May inflation rises 0.1% from the prior month, less than expected. The year over year growth also came in less than expected and inflation appears for now to be under control. Same headline around a very similar timeframe. Private sector hiring rose by just 37,000 in May. The lowest in more than two years, the labor market is softening.
And so it's our stance and belief that the Fed needs to act and lower rates and that inflation number from this week probably starts to set the table for one to two rate cuts in 2025. But time will tell, I'm sure a lot of you start to wonder like why do we feel that rate cuts are so important or why are we so concerned about the rate sensitivity to the economy? And a lot of it to me comes down to the housing market. So when you look at the housing market, the housing market to me is a canary in the coal mine of the overall US economy. When consumers feel confident enough or in a strong enough financial position to be able to go out and purchase a home, it means that their job is going well, it means they're in good financial standing. It means that credit is in the right place and people can go ahead and make these big time one-off purchases. This chart here you're going to see on the screen basically outlines the fact that if you look at the median age of first
Time home buyers, the key there is first time home buyers is now sitting at 38 years old. That's up from 33 years old in 2020, and that's up off of the global financial crisis lows of age 30. That's a massive, massive increase in first time home buyers. If you look at that comparatively, if you go back to the eighties, it was the late twenties was the median first time home buyer age. This is a huge problem I feel for the economy because what's driving this is affordability. As inventories remain low, as private investors and private equity firms can continue to purchase single family homes, housing affordability is at all time lows; higher interest rates impact this. Consumers are concerned and worried of can they afford these payments? What happens if they miss out on rates going lower? And that indecision helps kind of keep things stagnant.
And then higher regulations on lending coming out of global financial crisis or 2008, there was a lot of regulation put place on mortgage lending and things that came into play and it's made getting a mortgage a lot harder. The other big thing is consumer sentiment. If people are worried that housing prices are going to come down or they're worried that rates are going to stay higher for longer or they're worried about the economy or inflation and all of these things, they're less inclined to buy a home. Why this is so important is the economic impact of the average home purchase. When somebody buys a home, they're not just buying that home, they're buying furniture that goes into the house. They're hiring contractors and vendors to come in and paint and redo flooring and help with the landscaping, and they're buying lawnmowers. They're buying all of these pieces that feed into the economy.
The National Association of Realtors puts out an annual number that they call their total economic impact. So for every house that's sold, the average economic impact of that transaction is around $113,000. So the multiplier effect of that across every house sold or built in the United States is huge. So a big portion of his income relative to real estate. Then there's the furniture purchases, the housing related expenditures, as well as things that come into play when it comes to new home construction. There's a lot that goes into this that has a like a reciprocal effect across the economy and that's why I view the housing market as so important and I don't see that improving until the Fed acknowledges that they have a rate problem. So with that in mind, let's talk market expectations for the back half of 2025, although I still remain concerned when it comes to the overall state of the economy, the market and the economy are two different things. We've talked about that at length over the last, you know, five years or so of doing these videos. Right now, the street or Wall Street has began increasing its year end price targets for what they expect the S&P 500 to be at. Most people at the start of the year had it around 6,600.
And then there were numbers well into the four thousands just two months ago. The consensus right now is the year closes around 6,250 to 6,500, which is about four to 6% higher than where things sit today. This is based on clarity surrounding the tariff expectations, massive CapEx spend when it comes to AI infrastructure and development of that space. And overall equity markets from here should be modest. That's the expectation through year end. We also expect one to two rate cuts in 2025, inflation appears under control. That's what the data is showing us. The employment market is softening, and I think the Fed will likely have to provide some stimulus here to the broader economy. And what I mean by that is, if we remove the technology sector and industrial sector from this equation, the rest of the market has kind of struggled here in 2025.
So as rates come down gradually, we expect the economy to ramp up into 2026 spurred by better consumer sentiment. A lot of things in the economy and markets manifest themselves. If people believe that things are going to be more affordable and that things are going to be better overall, they're willing to spend money which makes the economy grow. So how does this impact your portfolio? I think now is a really good time to reassess your risk tolerance, and potentially reassess your asset allocation. For the better part of the last two calendar years as markets have been pretty strong, both in 23 and 24, people may have over allocated themselves chasing returns, and you learned a very valuable lesson from mid-February through the first week of May. Now that markets have recovered back to these almost all time highs, it may be a good time to potentially rebalance and get more conservative if that sell off that you experienced during the end of the first quarter and start of the second quarter made you incredibly uncomfortable.
There's good value in 10 year treasuries right now. The treasury market has basically flipped on its head. Short term treasuries are overvalued. Nobody wants to touch long-term treasuries, but there's this middle part of the curve that looks really attractive. There's also great value in the healthcare sector. A lot of healthcare names have been bruised and battered as the new administration took over to start the year. And they're still really quality companies that over a long-term cycle probably are showing some pretty good value. We think it's important to be patient during times of market uncertainty like this. Do not go chasing returns. Do not go chasing the latest, greatest thing. Commit to your allocation and how it aligns to your financial plan and from there you'll be in really great shape. So that's everything for today's market update. As always, if you have any questions, comments, or concerns, I'm here to help. On behalf of us all here at Rise Advisors, thank you for taking the time to watch this. We hope you enjoy your summer months and we look forward to seeing you in the office here soon. Thank you and have a wonderful day.
Sources:
1. https://www.cnbc.com/2025/06/11/bessent-tariff-pause-negotiations-trump.html
2. https://www.cnbc.com/2025/06/11/cpi-inflation-may-2025.html#:~:text=The%20consumer%20price%20index%20increased,for%200.3%25 %20and%202.9%25.8: Torsten Slok good morning briefing 10/23/24 – Apollo
3. https://www.cnbc.com/2025/06/06/the-may-jobs-report-wasnt-nearly-as-good-as-it-looked-on-the-surface.html
4. https://x.com/unusual_whales/status/1932441874515796283
5. https://www.nar.realtor/blogs/economists-outlook/how-do-home-sales-affect-the-economy-and-the-job-market-in-your-state
This presentation is for Informational purposes only.
All investment strategies including rebalancing and diversified asset allocation have risk. Past performance of our investment approach, component holdings and methods does not guarantee future results. Advisory services offered through Rise Advisors, LLC ("Rise") Registered Investment Advisor. While all data is believed to be from reliable sources, accuracy and completeness are not guaranteed.