Bearish Winds: The Week Ahead

Fresh news and strategies for traders. SPY Trader episode #1256. Alright folks, welcome back to Spy Trader, your daily dose of market insights and trading strategies. I'm your host, Captain Cashflow, and it's 6 am on Sunday, June 22nd, 2025, Pacific Time. We're getting an early start because the market never truly sleeps, and the week ahead, from June 23rd to the 27th, looks like it's going to be a bit of a bumpy ride. While we're anticipating some modest equity gains over the next year, the immediate forecast for the coming week is leaning 'Slightly Bearish.' Let's dive into why. First up, the big picture. Our economy is in a tricky spot, dealing with slowing growth and persistent inflationary pressures. We saw a contraction in real GDP in the first quarter of 2025, mainly because of a surge in imports ahead of new tariffs. Although we expect a rebound in the second quarter, underlying growth is projected to slow down for the rest of 2025, with the Federal Reserve forecasting just 1.4% real GDP growth for the year. Inflation remains a key concern, with the OECD predicting US inflation to approach 4% by yearend 2025. While recent Consumer Price Index and Producer Price Index reports showed coolerthanexpected inflation, persistent wage pressures and the full impact of a multidecade high average effective tariff rate, currently around 15%, suggest goods prices could still climb. The Federal Reserve recently held interest rates steady at 4.25% to 4.5%, playing it patient and datadependent. Some officials don't see any rate cuts this year, while others still expect two. Expectations for a July rate cut have actually diminished a bit. A major event this week will be Fed Chair Jerome Powell's testimony before Congress on Tuesday, June 24th. Investors will be hanging on his every word for clues on the Fed's future monetary policy. Now, let's look at the key economic data hitting the wires this week. On Monday, June 23rd, we'll get the S&P Global Flash Manufacturing and Services PMI reports, along with existing home sales. We'll also hear from Federal Reserve Governors Waller and Bowman, and Chicago Fed President Goolsbee. Come Thursday, June 26th, we'll get updates on US Durable Goods Orders and Initial Jobless Claims, plus the Consumer Confidence Index, which is expected to show a decline, possibly hinting at weaker consumer spending. But the big one everyone will be watching for is on Friday, June 27th: the Personal Consumption Expenditures, or PCE Price Index, and core PCE. This is the Fed's preferred inflation gauge, and it could really shake up market expectations for future Fed actions. Beyond the numbers, geopolitical tensions are still in play. The ongoing IsraelIran conflict continues to inject uncertainty, and while we've avoided the worstcase scenarios so far, the potential for escalation remains a key risk, influencing things like oil prices. The trade war, especially with China, keeps disrupting supply chains and affecting corporate performance. The 90day tariff pause is set to end on July 9th, which could bring new volatility, even if an extension is on the table. These trade tensions might actually keep the US dollar under pressure, potentially leading to a weaker dollar, which could be a silver lining for US multinational corporations with significant international operations. Looking at recent sector performance, in the week ending June 20th, financial services and energy sectors were pretty resilient, performing well. On the flip side, healthcare and basic materials struggled. Technology stocks have seen some headwinds recently due to tariff uncertainties, but longterm 'mega forces' like Artificial Intelligence are still expected to drive returns, keeping an overweight view on US stocks overall. Earnings season isn't in full swing for the big tech giants, but we do have some notable companies reporting. On Monday, June 23rd, keep an eye on FactSet Research Systems, Commercial Metals Co., and KB Home. Tuesday, Ju

Episode Transcript

(00:00):
Alright folks , welcome back to Spy Trader , your daily dose of market insights and trading strategies .
I'm your host , Captain Cashflow , and it's 6 am on Sunday , June 22nd , 2025 , Pacific Time .
We're getting an early start because the market never truly sleeps , and the week ahead , from June 23rd to the 27th , looks like it's going to be a bit of a bumpy ride .

(00:26):
While we're anticipating some modest equity gains over the next year , the immediate forecast for the coming week is leaning ' Slightly Bearish .
' Let's dive into why .
First up , the big picture .
Our economy is in a tricky spot , dealing with slowing growth and persistent inflationary pressures .
We saw a contraction in real GDP in the first quarter of 2025 , mainly because of a surge in imports ahead of new tariffs .

(00:54):
Although we expect a rebound in the second quarter , underlying growth is projected to slow down for the rest of 2025 , with the Federal Reserve forecasting just 1.4% real GDP growth for the year .
Inflation remains a key concern , with the OECD predicting US inflation to approach 4% by yearend 2025 .

(01:18):
While recent Consumer Price Index and Producer Price Index reports showed coolerthanexpected inflation , persistent wage pressures and the full impact of a multidecade high average effective tariff rate , currently around 15% , suggest goods prices could still climb .
The Federal Reserve recently held interest rates steady at 4.25% to 4.5% , playing it patient and datadependent .

(01:47):
Some officials don't see any rate cuts this year , while others still expect two .
Expectations for a July rate cut have actually diminished a bit .
A major event this week will be Fed Chair Jerome Powell's testimony before Congress on Tuesday , June 24th .
Investors will be hanging on his every word for clues on the Fed's future monetary policy .

(02:10):
Now , let's look at the key economic data hitting the wires this week .
On Monday , June 23rd , we'll get the S&P Global Flash Manufacturing and Services PMI reports , along with existing home sales .
We'll also hear from Federal Reserve Governors Waller and Bowman , and Chicago Fed President Goolsbee .

(02:30):
Come Thursday , June 26th , we'll get updates on US Durable Goods Orders and Initial Jobless Claims , plus the Consumer Confidence Index , which is expected to show a decline , possibly hinting at weaker consumer spending .

But the big one everyone will be watching for is on Friday , June 27th (02:46):
the Personal Consumption Expenditures , or PCE Price Index , and core PCE .
This is the Fed's preferred inflation gauge , and it could really shake up market expectations for future Fed actions .
Beyond the numbers , geopolitical tensions are still in play .

(03:10):
The ongoing IsraelIran conflict continues to inject uncertainty , and while we've avoided the worstcase scenarios so far , the potential for escalation remains a key risk , influencing things like oil prices .
The trade war , especially with China , keeps disrupting supply chains and affecting corporate performance .

(03:31):
The 90day tariff pause is set to end on July 9th , which could bring new volatility , even if an extension is on the table .
These trade tensions might actually keep the US dollar under pressure , potentially leading to a weaker dollar , which could be a silver lining for US multinational corporations with significant international operations .

(03:54):
Looking at recent sector performance , in the week ending June 20th , financial services and energy sectors were pretty resilient , performing well .
On the flip side , healthcare and basic materials struggled .
Technology stocks have seen some headwinds recently due to tariff uncertainties , but longterm ' mega forces' like Artificial Intelligence are still expected to drive returns , keeping an overweight view on US stocks overall .

(04:22):
Earnings season isn't in full swing for the big tech giants , but we do have some notable companies reporting .
On Monday , June 23rd , keep an eye on FactSet Research Systems , Commercial Metals Co.
, and KB Home .
Tuesday , June 24th brings FedEx , and analysts are expecting a ' noisy miss ' for them due to those tariffrelated volume headwinds .

(04:46):
Wednesday , June 25th , Micron Technology is forecast to show strong growth , and we'll also hear from General Mills , Paychex , and Winnebago Industries .
And on Thursday , June 26th , Nike is expected to report a significant drop in earnings and revenue , largely because of tariff issues and an oversupplied product line .

(05:08):
McCormick & Company and Walgreens Boots Alliance are also on the schedule .
These reports could definitely cause some sectorspecific movements , especially for logistics , semiconductors , consumer goods , and retail .
So , given this ' Slightly Bearish' nearterm outlook and the expected volatility , we're suggesting a cautious but adaptable approach for the upcoming week .

(05:30):
First , keep your eyes glued to those key economic data releases and anything the Fed says .
The PCE Index on Friday is huge .
A higherthanexpected inflation reading could confirm the Fed's patient stance on rate cuts and make markets nervous .
But a significantly lower PCE could spark optimism for earlier cuts .

(05:52):
Also , Fed Chair Powell's testimony on Tuesday is a mustlisten for any shifts in their outlook .
The PMI and consumer confidence data will also give us realtime insights into economic health .
For sectorspecific considerations , with all this uncertainty , consider maintaining exposure to defensive sectors like Utilities , Consumer Staples , and Healthcare .

(06:18):
These tend to be more stable when the economy slows down .
The Energy sector might continue to be strong thanks to ongoing Middle East tensions .
For tech , while AI is a longterm driver , those shortterm tariff headwinds could create volatility .
If you're looking at tech , focus on companies with strong balance sheets and diversified revenue streams that aren't overly reliant on global trade policy .

(06:44):
Industrials and Consumer Discretionary companies , especially those with international supply chains or heavy reliance on consumer spending , could face challenges due to tariffs and potentially weakening consumer confidence .
FedEx and Nike's earnings will be great bellwethers for these segments .
And finally , some general risk management tips .

(07:07):
Always maintain a welldiversified portfolio across different asset classes and geographies to spread out your risk .
With stocks near alltime highs , some valuations look stretched , so exercise caution and scrutinize valuations before making new investments .
And stay super informed on geopolitics and trade .

(07:27):
Developments in the Middle East and any news regarding US trade policy , especially as that July 9th tariff pause deadline approaches , can trigger rapid market shifts .
In an uncertain environment , focusing on highquality companies with strong fundamentals , stable earnings , and robust balance sheets is often a prudent strategy .

(07:49):
That's it for this early morning edition of Spy Trader .
Stay nimble out there , and we'll catch you next time !