Stocks, Higher or lower from here?
Will stocks move higher or lower? Over the longer term, the answer has proven higher. In the shorter term, slippery oil prices may make the path slick.
Oil has been trading lower for 2025, until last week. Immediately after Israel and Iran traded missile attacks, the price of oil surged approximately 14% as reported by the Wall Street Journal.
One of the integral components to containing inflation is the price of energy. When the dust settled, oil rose last week by 12.88%, leaving the year-to-date price up 1.65%. If the price of oil holds or moves higher, we can expect pressure on energy costs which may push last week’s favorable CPI reading higher.
Last week the Consumer Price Index (CPI) rose .1% for May. Markets applauded the benign reading until the missile launch.
We have tariff uncertainty, tax uncertainty, increasing political polarization and now potentially high energy costs to contend.
Tariff Progress?
Last week China and the US announced they are close to a “deal” regarding trade. The markets yawned as nothing appears concrete.
We also heard from US Secretary Howard Lutnick that the EU deal may be the last to be completed, and we have yet to hear progress regarding Japan, India and other countries.
I’m not surprised the negotiations are taking longer than predicted. The longer the lack of progress, the more potential pressure builds on our markets.
We are used to the markets climbing the infamous “wall of worry”: however, the wall may be slick with Oil. For markets to climb higher, tariff progress needs to favorably accelerate.
US Treasuries*- Stable for Now!
There has been plenty of discussion suggesting some investors are losing faith purchasing and holding US Treasuries. Historically, US Treasuries have been considered a “safe haven.”
The US consistently needs to auction new debt to pay our current bills as well as ongoing interest payments from our prior debt.
Last week many were concerned as the US was auctioning $119 billion of 3-year, 10-year and 30-year US Treasuries. The concern was that there would not be sufficient buyers, which would lead to higher interest rates. The concern was incorrect as the demand was more than adequate to have investors absorb all $119 billion at favorable rates.
I am concerned about the stability of US Treasuries and the US dollar going forward. If our government continues to borrow, the amount of interest you and I pay will continue to grow, as well as the overall debt.
I can only hope someone will wake up and realize; if we continue to deficit spend in the same manner, eventually we will have to pay the piper. When will this happen? I do not believe it’s this year and I do not believe its over 10 years hence.
*Government bonds and Treasury bills are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.
Week Ahead!
The 2 major reports for the shortened trading week include retail sales on Tuesday and the Federal Reserve rate announcement on Wednesday.
Hard to see the Fed moving rates at this point. After this Wednesday, the Fed will meet 4 more times this year with the next meeting being July 29th.
With a light slate of economic news, tariffs, taxes, and Israel/Iran will remain front and center.
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All data sourced from Wall Street Journal, June 13, 2025.
Stock investing includes risks, including fluctuating prices and loss of principal. The fast price swings in commodities will result in significant volatility in an investor’s holdings. Commodities include increased risks, such as political, economic, and currency instability, and may not be suitable for all investors. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested directly.
