Market Recap: 2-6 June 2025
Financial Markets
US Stock Market
This week was positive for the overall equity markets with the S&P500 and the NASDAQ 100 gaining 1.5% and 2%, respectively. The main indices are now above the 200-day moving average and we approach the all-time-highs. The small cap index (Russel 2000) was up by 3.5% and is below the 200-day moving average, which could act as resistance. Trading volumes were average.
COMMODITIES
Precious metals held this week. Gold and silver were up by 0.6% and 9.1%, respectively. Gold lost its upward momentum and is either consolidating or getting ready to correct – if a correction occurs, the first target should be around 3000$/oz. Silver jumped this week and closed near ~36$/oz – we need to wait for confirmation of this price move, because silver could come back to 35$ at any time.
WTI crude oil recovered this week, closing at ~65$/bbl. The trading range in the near future seems to be 54-67$/bbl, but oil may be subject to large swings due to wider macroeconomic developments or major oil producer announcements.
Bitcoin corrected 0.8% after reaching a new all-time-high a couple of weeks ago (112k$). If it continues falling, the next target is likely around 102k$. For the next weeks, the key resistance and support levels on Bitcoin, are 112k$ and 92k$, respectively.
US DOLLAR, MONEY SUPPLY
The relative strength of the US dollar (DXY) was essentially unchanged for the week. The EUR/USD is around 1.139$, the GBP/USD is at 1.353$, and the USD/JPY is at 144.88 JPY.
US M2 money supply at the date of 28th April 2025 was up by 0.72%, showing a slow increase over the previous month – credit institutions didn’t stop lending so far. If the money supply was going down, it would be another warning sign for the economy and equities.
The national financial conditions index (NFCI) released on 26th May 2025 loosened by 3.6%. Note that this indicator is delayed by two weeks. Positive numbers in the NFCI mean tighter financial conditions, while negative numbers indicate looser financial conditions.
BONDS AND OPTIONS
US bond yields rised slightly this week. Yields now sit at 4.037% for the 2-year and 4.508% for the 10-year. As you can see, the yield curve has uninverted since a year ago, and lower yields are expected in the next few years, likely as a consequence of a recession and interest rate cuts. However, long-term growth and inflation expectations are about 5%.
The VIX closed the week at ~16.8, a slight decrease relative to the previous period. Risk premiums in the options market are moderate. Similarly to previous weeks, it is our opinion that the overall risk in the stock market (high valuations in the big caps) and uncertainty about the US and worldwide economy is considerable. Thus, any equity purchases must be strategic and opportunistic!
Comment Section
The US equity markets are holding for the moment and financial conditions are not tight. A market lateralization could continue for the next few weeks.
The Trump trade war drama will continue next week, with US and Chinese officials meeting in London on Monday to discuss trade between the two nations.
In the US, unemployment remains at 4.2% and nonfarm payrolls increased by 139K in May 2025, a small slowdown from April’s downwardly revised 147K, but slightly above forecasts of 130K. On paper, the US job market remains resilient.
Another piece of news is the departure of Elon Musk from the Department of Government Efficiency (D.O.G.E.) task force. This should have no major macro implications as the actual consequences of D.O.G.E. spending cuts is quite limited.
As we have been saying, some damage to the economic activity was done in April-May 2025 and that will be reflected in the next earnings season (Q2 2025). If we had to forecast, we would say this year we will likely see a sideways equity market, with alternating waves of optimism and pessimism. Real economic growth will not be great, and things can turn sour at any moment if a recession is confirmed towards the third or fourth quarters of 2025.
Have a nice weekend, and good luck!!!