The Markets – July 1, 2025

Major U.S. stock indexes raced to new highs last week.

In a remarkable recovery from April’s double-digit downturn, the Standard & Poor’s (S&P) 500 Index raced to a new record high last week, and so did the Nasdaq Composite Index (Nasdaq). Key drivers behind the ascent included:

Investor optimism. Last week, the “Bull and Bear” investor sentiment indicator rose to its highest level since last November, reported Martin Baccardax of Barron’s. Easing of tensions in the Middle East lifted investor optimism. As the region settled, oil prices moved lower, quelling concerns that rising oil prices would push inflation higher.

Consumer sentiment. The University of Michigan’s Consumer Sentiment Index improved 16 percent in June, although it remained 18 percent below December’s reading. Expectations for personal finances and business conditions improved. However, “consumer views are still broadly consistent with an economic slowdown and an increase in inflation to come,” reported Surveys of Consumers Director Joanne Hsu.

Muted inflation. It was widely expected that higher tariffs would mean higher inflation. So far, that hasn’t been the case. In May, U.S. government revenue from tariffs surged to a record high, reported Jarrell Dillard of Bloomberg, and consumer prices remained relatively steady. The Personal Consumption Expenditures (PCE) Index showed core inflation, which excludes volatile food and energy prices, rose 2.7 percent year over year. That was slightly above expectations, reported Nicole Goodkind of Barron’s.

Trade optimism. While concerns remain about the impact of tariffs on inflation, investors gained confidence that the outlook for trade is improving. “Trump administration officials have recently softened the focus on the self-imposed July 9 deadline for deals. On Friday, Treasury Secretary Scott Bessent [said] he hoped to have trade wrapped up by Labor Day and described the latest pact with China as de-escalatory,” reported Reshma Kapadia and Elsa Ohlen of Barron’s.

While current market momentum is impressive, “Some market watchers are cautioning that valuations are looking lofty, and that the S&P 500 would need an earnings boom or drastic Federal Reserve interest-rate cuts to justify current levels,” reported Natalia Kniazhevich of Bloomberg.

U.S. stocks faltered on Friday after an announcement that trade negotiations with Canada would not take place, reported Karishma Vanjani of Barron’s. However, the S&P 500 and Nasdaq still finished the week at record highs. Yields on longer maturities of U.S. Treasuries moved lower over the week.

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance; MarketWatch; djindexes.com; U.S. Treasury; London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

HOW AFFORDABLE ARE HOMES IN THE UNITED STATES? In the United States, homes are less affordable than they’ve been in a while. The Atlanta Federal Reserve’s Home Ownership Affordability Monitor tracks whether households earning a median income can afford a median-priced home. The Fed calculates that a home is affordable when the annual cost of owning it is less than 30 percent of a household’s annual income.

In April 2025 (the most recent data available), a median-priced home was out of reach for a median-income household.

By the Fed’s calculations, a median-income household would need to spend 46 percent of its annual pay to own a median-priced home. To afford the home, the household would need annual income of about $123,000, an increase of about 55 percent. Here are the Fed numbers from April:

• Median income (Median means one half of households earn more, and one half earn less): $79,409
• Median home price (One half of homes are priced higher, and one half are priced lower): $392,500
• Rate on a 30-year fixed-rate mortgage: 6.7 percent
• Median monthly payment (includes principal, interest, taxes, homeowners’ insurance, and private mortgage insurance): $3,069
• Percent of pay needed to meet annual cost of homeownership: 46 percent

Homeowners’ insurance is becoming more expensive

In some regions of the U.S., homeowners’ insurance is becoming more costly – and harder to acquire. “Homeowners in communities affected by substantial weather events are paying far more than those elsewhere. From 2018 to 2022, consumers living in the 20 percent of zip codes with the highest expected annual losses to buildings from climate-related perils paid…82 percent more than those in the 20 percent lowest climate-risk zip codes,” reported the U.S. Department of the Treasury.

How are younger people buying homes?

Younger Americans are employing a variety of strategies to make a home purchase possible.  According to a survey by a leading home sale site, aspiring Gen Z and Millennial homebuyers are:

• Working two jobs (39%),
• Receiving cash gifts from family (36%),
• Taking money from retirement plans early (22%),
• Spending an inheritance (16%), or
• Living with parents/family members to save money (13%).

If you’re interested in helping a loved one with a home purchase, please get in touch. We can help discuss the options.

WEEKLY FOCUS – THINK ABOUT IT

“Listen to the mustn’ts, child. Listen to the don’ts. Listen to the shouldn’ts, the impossibles, the won’ts. Listen to the never haves, then listen close to me…Anything can happen, child. Anything can be.”

– Shel Silverstein, Author

Warm regards,

Daniel J. Murphy, CFP®
Murphy Wealth Management Group
60 Merritt Blvd., Suite 106
Fishkill, NY 12524

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