Market Review 30th June 2025
- Simplicity News Desk
- Jun 30
- 5 min read
Everything you need to know, Simplified!
Summary
US President Trump’s half-time scorecard: six months into 2025, progress is evident on inflation, yields, the US Dollar, equities, tariffs and limited fiscal consolidation
Inflation is cooling though tariff passthrough expected to push inflation higher by year-end before cooling in 2026
Bond yields lower: 10-year yield down to 4.28% from a January peak of 4.80%, while 30-year yields remain elevated amid debt concerns
US Dollar weakness persists: USD down sharply year-to-date (YTD) across major currencies, driven by policy uncertainty, positioning unwind and falling yields
Equities rallying: US market up 4.8% YTD, hitting record highs last week; equity risk premium looks stretched with earnings yields on par with bond yields
Average effective US consumer tariff rate at 15.8%, highest since 1936; Yale estimates US$2tn revenue over next decade
Budget deficit pressures remain: tariff revenues offset some tax cut costs, but structural fiscal gaps persist; DOGE savings and offsets in budget bill below expectations.
Market Review
Half-time report: Trump’s scorecard
Six months into 2025 and it has been a story of impressive micro resilience against a backdrop of global macro uncertainty, with US policy playing a central role. Trade wars and kinetic wars have dominated headlines, yet through all the turbulence a clear journey has unfolded.
That journey is perhaps best understood through the lens of the Trump administration’s key economic goals:
Lower inflation
Lower bond yields - easing financial conditions and reducing government borrowing costs
Weaker US Dollar - supporting exports and reducing trade deficits
Higher equity market - albeit allowing for some ‘short-term pain’
Tariffs - reciprocate economic nationalism and rebalance trade deficit
Reduce budget deficit - fiscal consolidation, driven by DOGE and tariff revenue.
By these metrics, there has been clear progress, reflecting policy and external factors. Most of these trends were also apparent last week.
Lower inflation
Consumer prices have fallen from 3.00% in January to 2.35% in May. Last week, the US Federal Reserve’s (Fed’s) preferred inflation gauge – core PCE – came in at 2.68%, down from its February peak of 2.95%. Truflation, a private real-time index, has fallen from 3.07% at year-end to 2.10% last week. Most economists expect inflation to rise from here, peaking at 3.3% by year-end as tariff passthrough builds before easing again in 2026.
Lower bond yields
In his first term, Trump used the stock market as his barometer. In his second, it’s the 10-year treasury yield. The 10-year yield peaked at 4.80% in early January and currently trades at 4.28%, driven down by falling inflation and slowing growth. It hasn’t been plain sailing for the bond market, however, with longer-dated yields rising on loose fiscal policy and debt sustainability concerns. The 30-year yield is up year-to-date, now at 4.84%. Yields fell last week on progress toward a US-China trade deal.
Weaker US Dollar
Year-to-date, the Dollar has fallen against all major currencies: down 8.8% vs the UK Pound (GBP/USD closed the week at 1.37), 11.7% vs the euro (closing at its lowest for the year) and 8.0% vs the yen. The US Dollar weakened last week alongside falling bond yields. While positioning unwind has driven much of this decline, policy uncertainty around tariffs has added to US Dollar weakness. Interestingly, the US Dollar has fallen both on tariff announcements and trade deal news this year, confounding orthodox economic expectations.
Higher equity market
US equities rose 3.5% last week, hitting fresh all-time highs and are now up 4.8% year-to-date. Markets have been buoyed by softening tariff proposals, optimism around trade deals and ongoing corporate earnings resilience. The US equity market trades at a forward 12-month price to earnings (P/E)* ratio of 22x, a 33% premium to its long-run median, underlining the elevated expectations built into prices. With the earnings yield on par with bond yields the equity risk premium seems stretched but is buoyed by the strength of the corporate sector.
Introduced tariffs
Tariff levels have been a moving feast, according to the Yale Budget Lab, the average effective US consumer tariff rate is currently 15.8%, its highest since 1936. A reasonable base case might be a 10% universal tariff with punitive overlays targeting selected countries and sectors. Yale estimates tariffs imposed so far in 2025 will raise around US$2 trillion over 2026-35. Reciprocal tariffs come back into effect on 9 July, adding near-term uncertainty, though further trade deals are expected in the coming weeks.
Reduce budget deficit
Tariff revenues have risen by US$60bn year-to-date, offsetting part of the fiscal cost of Trump’s extended tax cuts. However, the removal of Trump’s key spending offsets from the budget – including Section 899, cuts to Medicaid, food stamps and student loan savings – has widened the gap. While tariffs are temporarily supporting fiscal revenues, structural deficit pressures remain unresolved. DOGE has so far saved an estimated US$190bn well below initial hopes.
The deficit has fallen US$150bn since Trump took office but it still sits at a colossal US$2tn and fundamentally government spending has risen, just less so than revenues.
Conclusion
2025 so far has delivered measurable progress against the administration’s stated economic goals. Inflation has fallen, bond yields are lower, the US Dollar has weakened, equities have risen, tariffs have been successfully introduced (subject to court rulings). Questions remain around the durability of these gains, the structural fiscal outlook, and how much of the progress reflects policy versus external forces. As the second half unfolds, trade policy, fiscal negotiations, and the evolving macro backdrop will determine whether these achievements prove transitory or foundations for lasting change.
The week ahead
Tuesday: Eurozone inflation
Our thoughts: Annual inflation is expected to come in at 2.0% for June, with underlying price pressures remaining subdued despite volatility in energy markets amid Middle East tensions. With economic activity still sluggish, the European Central Bank is expected to cut rates once more this year, taking the policy rate below its perceived long-term neutral level of 2.0%.
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