Stocks continued their upward momentum in June as investors leaned further into the “risk on” trade. The U.S. Total Stock Market posted a 5% gain, reaching new all-time highs. International stocks tracked slightly behind, returning 3.8% for the month. Foreign developed equities were outpaced by emerging markets, which posted some of the strongest returns of the group. And in a reversal from May, U.S. small cap stocks modestly outpaced large, with the Russell 2000 finishing up 5.4%.

Rates and employment

The primary driver pushing equities higher were increasing expectations for interest rate cuts. The Federal Reserve left rates unchanged at its latest policy meeting, which currently sit in a range of 4.25% to 4.50%. Fed officials continue to expect two 0.25% cuts in the second half of the year, though the view is far from unanimous. While unemployment remained steady at 4.2% in May, underlying trends suggest there is some softening. Anecdotally, jobs are becoming harder to come by, especially for young people. Unemployment is at 9.6% for those age 20-24 according to the Bureau of Labor Statistics.

Macroeconomic conditions

June also had its share of geopolitical events. On June 13, Israel launched a large-scale aerial series of strikes on Iran. Eight days later, the US joined the attack. The initial reaction by equity and bond markets was subdued. Oil initially spiked, then returned to around pre-attack levels.

Signed into law

Finally, the “Big Beautiful Bill” continued to be hotly debated in the Senate, facing pushback from several lawmakers who wanted deeper spending cuts. But after an all-night session on the last day of the month, the bill was officially approved in a 51-50 vote, with JD Vance as the tiebreaker. The Bill was signed into law on July 4.