Welcome to the monthly market update from Midland Wealth Management. I am Dan Zeigler, Senior Portfolio Manager. I appreciate you joining me today as we take a few minutes to share the Investment Team’s latest views on the economy and financial markets.
Geopolitical Landscape
In June, market attention shifted away from tariff headlines and toward developments in the Middle East.
Escalating tensions between Iran and Israel drove oil prices up to $75 per barrel amid concerns over potential disruptions to global supply.
Fortunately, a ceasefire agreement eased those fears. Oil has since returned to the mid-$60s, and the risk premium built into energy markets has moderated.
While this has brought some relief to investors, the geopolitical environment remains fluid, and market sentiment could continue to fluctuate with the news cycle.
Equity Updates
Despite rising geopolitical risks, equity markets held firm. The S&P 500 posted a gain of approximately 11% for the quarter, while the NASDAQ climbed approximately 18%, both closing at all-time highs.
Looking ahead, S&P 500 earnings are projected to grow modestly—about 5%—as companies navigate evolving economic conditions and tariff uncertainties.
With lowered expectations already priced in, room remains for companies to outperform these expectations.
International equities continued to outperform U.S. markets. The MSCI EAFE rose approximately 11.8%, and emerging markets were up almost 12%, supported by both a weaker U.S. dollar and easing geopolitical concerns. These results underscore the value of global diversification in today’s investing landscape.
Looking forward, investor sentiment will likely hinge on the outcome of key global developments, particularly the July 9th expiration of the 90-day tariff pause.
Fed Update / Inflation
The Federal Reserve held rates steady again in June at a range of 4.25–4.50%. In its latest Summary of Economic Projections (SEP), the Fed marginally downgraded its growth expectations while raising inflation and unemployment projections. It now sees 2025 GDP growth at 3.1% and unemployment ending this year at 4.5%.
Core PCE, the Fed’s preferred inflation gauge, rose 2.7% year-over-year, coming in a touch hotter than expected. Despite mixed data, the Fed continues to forecast two quarter-point rate cuts by year-end.
Recent remarks from Governors Waller and Bowman suggest a willingness to ease policy soon, pointing to moderating inflation and softening economic momentum. Still, uncertainty remains around the timing and pace of future adjustments. The long-run federal funds rate remains anchored at 3.0%.
One Big Beautiful Bill
In Washington, the Senate is moving forward with the “One Big Beautiful Bill.” Key provisions include making most of the 2017 tax cuts permanent, particularly lower individual tax rates. It also proposes increased funding for border security, defense, and energy production—offset by reductions in certain healthcare and nutrition programs.
The bill raises the SALT deduction cap from $10,000 to $40,000 for the next five years, reverting back to $10,000 afterward.
Additionally, it proposes raising the debt ceiling by $5 trillion, up from the original $4 trillion in the House version, ensuring the government can meet its obligations.
Initial projections estimate the bill could add $1 to $2 trillion to the federal deficit.
Updated Outlook
As we enter the second half of the year, we anticipate continued volatility amid changing geopolitical risks, shifting trade dynamics, and uneven economic data. That said, we also see compelling opportunities for long-term investors.
Our view remains cautiously optimistic. If the data continues to soften, we expect the Fed to act in the fall. While markets may face short-term headwinds, strong fundamentals in key sectors support our constructive outlook.
We continue to prioritize diversification, high-quality holdings, and active risk management, positioning portfolios to weather uncertainty and take advantage of emerging opportunities ahead.
