June 2025 US stock market outlook: Has the storm passed?
Be wary of the recent complacency; there’s turbulent water ahead before the skies clear.
David Sekera, CFA 04 June 2025
Mentioned: Meta Platforms Inc Class A (META), Alphabet Inc Class A (GOOGL), Tesla Inc (TSLA), Eli Lilly and Co (LLY), UnitedHealth Group Inc (UNH), Costco Wholesale Corp (COST), Procter & Gamble Co (PG), Walmart Inc (WMT)
Key takeaways
The US stock market is trading at only a 3% discount. Market-weight stocks overall, but overweight value. There is a minimal margin of safety as compared with risks ahead. The market is calm for now, but heightened volatility is expected in the coming quarters.
June 2025 US stock market outlook and valuation [...] Rising yields making markets nervous
Following a weak auction on 20-year US Treasury bonds, there is heightened sensitivity to Treasury yields. If US Treasury yields were to weaken, especially if they were to breach 5%, we expect it would likely lead to a downward adjustment in valuations across the US stock market.
An easing monetary policy does not appear to be in the cards in the near term. According to the CME FedWatch tool, the market is not expecting the Federal Reserve to cut the federal-funds rate anytime soon. It’s not until the September meeting that the market is pricing in a higher than 50% probability for the Fed to cut rates.
And it isn’t just the US bond market that has investors concerned. Yields on long-term Japanese bonds surged higher. The Japanese 40-year bond yield increased almost 120 basis points this year to 3.70% before coming back down to 3.07%. As yields rose and bond prices fell, many investors began to question the amount of embedded losses on the balance sheets of Japanese banks and insurance companies. With the oldest demographic among the developed markets and a debt/GDP ratio above 260%, many investors are questioning how long the Japanese markets can withstand higher interest rates.
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