One Big Beautiful Market Peak

Market Recap: 30 June – 4 July 2025

Financial Markets

US Stock Market

This short trading week was again positive for the overall equity markets, with the main indices hitting, yet again…new all-time-highs. The S&P500 and the NASDAQ 100 gained 1.7% and 1.5%, respectively. The main indices continue above the 200-day moving average and may fall to consolidate before making more gains…or they may fall a lot – a true correction can start at any moment. The small cap index (Russel 2000) followed the gain train, rising 2.1% and sitting slightly above the 200-day moving average, a short-term support. Trading volumes were slightly below average, which can be due to the Friday holiday (4th of July).

COMMODITIES

Precious metals continue consolidating and holding their levels. Gold and silver were up by 1.6% and 2.5%, respectively. Gold is still close to the previous all-time high. If gold corrects, the first target should be around 3000$/oz. Silver will likely stay above 35$/oz, which should act as support for the time being.

WTI crude oil was up by 2.2% after the major fall of last week (Israel-Iran ceasefire). WTI is likely close to resistance and the trading range for the near future will likely be 60-67$/bbl.

Bitcoin negotiated very close to all-time highs, but closed the week essentially unchanged, at ~108k$. For the next weeks, the key resistance and support levels on Bitcoin are 112k$ and 92k$, respectively.

US DOLLAR, MONEY SUPPLY

The relative strength of the US dollar (DXY) fell slightly to ~97. The EUR/USD is around 1.177$, the GBP/USD is at 1.365$, and the USD/JPY is at 144.51 JPY.

US M2 money supply at the date of 26th May 2025 was up by 0.36%, 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 23rd June 2025 tightened by 0.3%, confirming the loss of momentum in the loosening trend of the previous weeks. 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 rose slightly this week. Yields now sit at 3.886% for the 2-year and 4.348% for the 10-year. 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/or interest rate cuts. However, long-term growth and inflation expectations remain at 4.8-4.9%.

The VIX was essentially unchanged and closed the week at ~16.1, a level that shows some complacency as the overall market is quite expensive and the risks of overvaluation are naturally high. Risk premiums in the options market are less attractive. 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 at new all-time-highs and the probability of any disappointment pushing the market down are increasing.

The Israel-Iran conflict has de-escalated due to the ceasefire, and the Israel-Hamas conflict might undergo new negotiations.

US President Donald Trump has signed his landmark policy bill into law, a day after it was narrowly passed by Congress. The bill includes: extending 2017 tax cuts of Trump’s first term; steep cuts to Medicaid spending, the state-provided healthcare scheme for those on low incomes and the disabled; new tax breaks on tipped income, overtime and Social Security; a budget increase of $150bn for defense;
a reduction in Biden-era clean energy tax credits; and $100bn to Immigration and Customs Enforcement (ICE). Moments before the bill signing, there was a fly-by of a pair B-2 bombers – the same kind of aircraft that participated in the Iran operation – flanked by highly advanced F-35 and F-22 fighter aircraft.

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 (Q3 2025), but by the end of the year we might look back and conclude that it was not very serious. The current middle-east wars may have extra effects that we cannot forecast and are certainly generating a lot of volatility. If the equity markets continue rising with enthusiasm, the odds are on the side of an upcoming correction.

Have a nice weekend, and good luck!!!

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