At PalomarWealth, it is important to us that you are well informed about what’s happening in the markets. Here are a few of the key topics of conversation that we feel deserve the most attention this month. If you have any questions or would like to continue the conversation, let us know, and we appreciate the opportunity.
The first half of June delivered a sharp test for a market grown accustomed to setting records. Two forces collided. The artificial intelligence trade, which had powered equities to repeated highs, suffered its first real stumble after a marquee chip supplier delivered a disappointing outlook. Almost simultaneously, renewed fighting between Israel and Iran pushed oil prices higher and revived fears that energy costs would keep inflation elevated. The result was a burst of volatility that broke a long stretch of calm, though steadier nerves and hopes for de-escalation helped equities recover much of the lost ground by mid-month.
Semiconductors sat at the epicenter. Broadcom, a leading beneficiary of the AI buildout, posted strong results but declined to raise its full-year AI revenue forecast and guided the current quarter below Wall Street estimates. The reaction was brutal. On June 4th, the Nasdaq Composite fell more than 4%, its worst session since the tariff turmoil of April 2025, while the S&P 500 dropped 2.6%. More than a trillion dollars in chip-sector value evaporated in a single session. The selloff did not last. Bargain hunters soon returned, and continued hyperscaler spending signaled that AI infrastructure demand remained intact.
The economic data gave the Fed little room to relax. The May employment report showed 172,000 jobs added, more than double the 80,000 expected, with unemployment steady at 4.3%1. But the Consumer Price Index (CPI) rose 0.5% in May and 4.2% from a year earlier, its fastest annual pace in three years, driven largely by energy2. The next day, the Producer Price Index (PPI) rose 6.5% from a year earlier, the largest gain since late 20223. Underlying pressures stayed more contained: core CPI, which excludes food and energy, rose just 0.2% on the month and 2.9% from a year ago2.
Attention now turns to the Federal Reserve, which meets on June 16 and 17 and is widely expected to hold rates at 3.5% to 3.75%. The hotter inflation prints, even if energy-driven, give officials little reason to hint at cuts, and recent minutes show some open to higher rates should pressures persist. The larger swing factor sits in the Middle East. Oil retreated toward $85 a barrel on reports that a deal to ease Iran sanctions and reopen the Strait of Hormuz might be near, though nothing is settled. Whether June's inflation scare proves a passing energy shock or something stickier may hinge less on the Fed than on the fragile diplomacy in the Gulf.
Sources:
1. Bureau of Labor Statistics, https://www.bls.gov/news.release/empsit.nr0.htm
2. Bureau of Labor Statistics, https://www.bls.gov/news.release/cpi.nr0.htm
3. Bureau of Labor Statistics, https://www.bls.gov/news.release/ppi.nr0.htm
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Definitions:
The S&P 500® Index, or the Standard & Poor's 500® Index, is a market-capitalization-weighted index of the 500 largest U.S. publicly traded companies.
The Nasdaq-100 is a stock market index made up of equity securities issued by 100 of the largest non-financial companies listed on the Nasdaq stock exchange. It is a modified capitalization-weighted index.
The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
The Bureau of Labor Statistics (BLS) is an agency of the United States Department of Labor. It is the principal fact-finding agency in the broad field of labor economics and statistics and serves as part of the U.S. Federal Statistical System. BLS collects, calculates, analyzes, and publishes data essential to the public, employers, researchers, and government organizations.
The Producer Price Index (PPI) is a measure of the average change in selling prices received by domestic producers for their goods and services over time. Published monthly by the Bureau of Labor Statistics (BLS), PPI tracks inflation at the wholesale level before it reaches consumers.
Brent is the leading global price benchmark for Atlantic basin crude oils. It is used to set the price of two-thirds of the world's internationally traded crude oil supplies. It is one of the two main benchmark prices for purchases of oil worldwide, the other being West Texas Intermediate (WTI).
WTI crude oil, or West Texas Intermediate, is a specific grade of crude oil and a major benchmark for oil pricing, particularly in the North American market.
The CME FedWatch Tool is a tool created by the CME Group (Chicago Mercantile Exchange Group) to act as a barometer for the market’s expectation of potential changes to the fed funds target rate while assessing potential Fed movements around Federal Open Market Committee (FOMC) meetings.
Nonfarm payrolls measure the total number of paid workers in the U.S., excluding farm employees, government employees, private household workers, and employees of nonprofit organizations.
The unemployment rate represents the number of unemployed people as a percentage of the labor force (the labor force is the sum of the employ