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Weekly Commentary

Investment Commentary – June 30, 2025

Stuart Katz

In the second quarter, the S&P 500 was up ~10%. The U.S. dollar has had one of its worst starts to a year on record. It is on pace to fall approximately 8% in Q2 alone. Almost every asset class is negatively correlated with the U.S. dollar. To put the first half of 2025 simply, the USD was down, and almost everything else was up. The biggest winner once again from the falling USD was European assets, but even emerging market equities have caught up. U.S. equities have started to perform better and are still being driven by the momentum factor. The problem we are starting to face again (like the start of the year) is that stocks are starting to get expensive again. The forward P/E on the S&P 500 is on the brink of hitting 22x not that far (9%) from all-time high valuations reached in 1999-2000 of 24x.  Amidst all the geopolitical uncertainty, slowing economic growth, and still relatively restrictive Fed, equities brushed all that off to be priced in at the highest valuations in 30 years.

Markets have rebounded from the April lows and have gone all in on risk. High beta stocks are at new all-time highs vs. low volatility stocks.   Bitcoin is back near all-time highs of $108,000. The Investment Office is focused on the fundamentals. We still see a disinflationary environment being driven by housing, a decelerating growth environment (but not yet a recession), and these trends are not being picked up by markets. Instead, markets are trading as global growth is improving and there are few macro risks. We continue to like allocations to non-US stocks and quality-at-a-reasonable price in the U.S. with U.S. large, mid-cap stocks and small-cap stocks. In addition, we continue to see that the bond market has yet to realize potential disinflationary forces. In our view, high quality municipal bonds continue to offer compelling income and the potential for further price returns if the economy slows further.

Disclosure and Source

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