S&P 500 tops 6,000; May labour report points to a gradual erosion of the jobs market, but with continuing persistent inflation, the Fed is likely to stay on hold at least until the September meeting. Important meetings US-China on trade on Monday, with US CPI on Wednesday, and US PPI on Thursday. Oracle’s report on Wednesday, after close, can give us precious insights into business in April and May at a time when analysts are significantly cutting estimates for 2Q25. New GS targets for the S&P 500: 6,100 by the end of 2025, and 6,500 on a 12-month basis. The biggest tail risk is the US Economy falling into a recession (35% chance in 2025), resurging inflation, revenues/earnings not matching forecasts, followed by damages done by tariffs/government policies, adverse geopolitical outcomes, and valuations (very high multiples).

Major market events 9th – 13th June 2025

Economic data highlights of the week

Mon: CH, AU, GR, NO – Holiday, JP GDP (1Q25), JP GDP Price Index (1Q25), CN CPI (5/25), CN PPI (5/25), CN Trade Balance (5/25), US Atlanta Fed GDPNow (2Q25)

Tue: PT – Holiday, UK Unemployment Rate (4/25), BR CPI (5/25)

Wed: JP PPI (5/25), US CPI (5/25)

Thu: UK GDP (4/25), US PPI (5/25), US Initial Jobless Claims, US Fed’s Balance Sheet

Fri: JP Industrial Production (4/25), DE CPI (5/25), FR CPI (5/25), SP CPI (5/25), EU Trade Balance (4/25), EU Industrial Production (4/25)

Performance Review

Source: Google

InflectionPoint reports:

* 6,000! It took a while before we managed to see this level – welcome back! Another constructive week for equities, with the Nasdaq leading again, supported by the superior earnings potential of its companies. The ECB cut its rates to 2% and signaled that most of their job was done, although tame European Inflation at 1.9% might support further easing into the summer. The comments from Frankfurt managed to slightly lift the USD, which rose to 1.1480 before closing the week a touch below 1.14. The key May payroll report pointed to a gradual moderation of the labour market, although I doubt that will move the Fed, whose December forecast also suggests two cuts (September/October and December ?) by the end of the year. This week, we will get an important update from the US CPI on Wednesday, and the US PPI on Thursday – once again, inflation has been falling recently, but not as quickly as the US Central Bank would like it to do. This was also confirmed by the Core PCE Price Index a couple of weeks ago, which came in line with forecasts at 2.5%. Also on Wednesday, we will have Oracle’s report, which will be a key indication of how the business went in April and May. Given that estimates for 2Q25 have been hammered, as we will see, it is very important to follow reports for this period of time, although these will be available roughly starting one month from here. Apparently, a very important trade meeting will take place tomorrow in London between the US and China. Any indication of a positive outcome will be cheered by the market, because this, in my opinion, is not discounted yet. Goldman Sachs forecasts S&P 500 Earnings Per Share (EPS) to reach $262 in 2025 and $280 in 2026, representing a 7% growth rate for both years. These current projections represent a notable upward revision from earlier, more pessimistic assessments that were heavily influenced by initial fears of stagflation and the potential adverse impacts of heightened tariffs. If there is no or limited disruption to trade, I think that some of the previous targets for the S&P 500 (beyond 6,000) can be revisited; Goldman Sachs has reduced its odds of a US recession to 35% from 45%. Keeping equities to buy (with the famous 3% weekly stop), due to a more positive scenario and a fewer/no disruptions on trade, keeping US bonds to hold, and European bonds to buy, and remaining positive on the CHF, which seems to be the only currency to hold its value no matter what (the SNB has one of the lowest interest rates among major countries at just 0.25%). 

* The reporting season for 1Q25 has just finished, and the focus turns to 2Q25. GDP numbers for 2Q25 seem to be good, with the Atlanta and New York Fed finally in agreement on a positive direction. The current P/E ratio of 21.3x is above the average P/E ratio of the last 5 years at 19.9x and the 10-year average at 18.4x. Even this latest figure, in my opinion, does not produce enough comfort to call for a bounce on valuation alone; a 16x multiple, or better still, a 14x multiple, would offer better entry points. The S&P 500 so far has not touched the previous multiple high of 24x, and I think that record might stand the test of time for a few more years. Given the capitulation from early this year,  I would love to think that we have seen the lows in 2025, leaving room to grow, even with a multiple which begins with a 2, but continue to diversify and use prudent risk management. 

*  The Federal Reserve was on hold in May, as expected, and mentioned that the outlook is becoming more complicated; but inflation (both CPI and PPI) is softening and coming in below forecasts for the second month in a row. This, unfortunately, was not followed through by the Core PCE Price Index, the Fed’s favourite measure of inflation, which came in at 2.5%, matching estimates. The nonfarm payrolls, as mentioned earlier, point to a gradual reduction in job growth, but were good enough to confirm the solidity of the US Economy, which the market cheered on Friday. The US Central Bank will continue to be data-dependent in the future; June is no longer promising and looks like another hold (2.6%), ditto for July (16.7%), while September seems the first reasonable chance of a cut (60.8%), but that is looking increasingly 50/50. The forecast for December currently prices in 2 cuts, with rates at 3.75-4.00%, one less than forecasted by Goldman Sachs. Be wary of aggressive Fed cuts because they might signal an upcoming recession; non-recessionary interest rate eases are always welcomed by equities. We need (lower) yields and (higher) earnings to support some of the highest multiples since my heyday (the fated 1999-2000).

* Yields on US 10-year Treasuries have reached 4.50%, and were up again last week, while European government bond yields were down. While in 1999 yields were even higher, and the Fed was hiking, not easing, we definitely need yields to return below 4% to have a more constructive scenario, albeit gradually and not through a crash. The 2025 S&P 500 bottom-up earnings estimate is down to 264.49, still above the revised Goldman Sachs top-down estimate of 262. It is concerning to note that, while for 1Q25 earnings are strong, there is a continued reduction of those for the second quarter and for the full year, which means that analysts are expecting a slowdown later on.

Source: FactSet

* The US GDP closed 1Q25 with a reading of -0.2%, after the latest update, improving slightly from the original data, which saw a decline of -0.3%. The Atlanta Fed GDPNow model is in positive territory after a negative reading for the GDP in 1Q25, with a new forecast of 3.8%, down from 4.6% last week. The Blue Chips consensus is flattening out on the 1% level. The New York Fed’s Nowcast model has an almost identical forecast of 2.33%, down from 2.42% last week. I believe it is prudent to make an average of those two forecasts to get to the real number; it is particularly good that these are now converging. Earnings growth for 1Q25 is now 13.3%, compared with a forecast of 7.2% as of March 31st. Revenue growth is slower, at 4.9% in 1Q25 vs 4.3% as of March 31st. For 2025, earnings growth is forecasted at 9.1% vs 11.3% as of March 31st, with revenues coming in at 4.9% vs 5.4% as of March 31st. 2Q25 seems to be very important in assessing if the slowdown expected for the end of the year will indeed materialise, as earnings are forecasted to grow by just 5.0% vs 9.3% as of March 31st, and revenues are forecasted to grow by 4% vs 4.7% as of March 31st. Finally, it’s worth noting that the chance of a recession in the next 12 months, as calculated from the yield curve, according to the Federal Reserve Bank of Cleveland, is presently (April 2026) 24.99%. The peak was 68.76% in April 2024, and it was the only time since 1960 in which a recession did not materialise given such a forecast. The current level is not too far from what economists are currently predicting: a 35% chance of a recession in 2025.

Source: Blue Chip Economic Indicators and Blue Chip Financial Forecasts; Federal Reserve Bank of Atlanta

Source: Federal Reserve Bank of New York, New York Fed Staff Nowcast

Source: Federal Reserve Board, Federal Reserve Bank of Cleveland, Haver Analytics

Earnings, What’s Next?

The reporting season for 1Q24 is now coming to an end. Here’s a list of companies reporting this week. Highlights include Oracle (Wednesday, After Close) and Adobe (Thursday, After Close)

Source: Earnings Whispers

Market Considerations

Source: Goldman Sachs Global Investment Research, ISABELNET.com

Source: Census Bureau, Goldman Sachs Global Investment Research, ISABELNET.com

Revenue growth estimates for 2025 are forecasted to grow by 4.9% (5.4% on March 31st), and earnings growth estimates for 2025 are predicted to grow by 9.1% (11.3% on March 31st), so the future looks bright. Introducing forecasts for 2026, which sound again very positive, with revenue to grow by 6.2% (6.6% on March 31st) and earnings to grow by 13.5% (14.2% on March 31st). As mentioned, the Fed has cut its rates by 100bp in 2024 and will continue easing. Apart from the cut from quite high levels, which will probably help make these lofty multiples seem more bearable than offering a real stimulus to the economy, it will be important to see the extent to which the Central Banks are willing to cut rates and their timeframe.  

Two highlights this week. First, we have a chart from Goldman Sachs, which highlights the current relationship between debt and GDP in the US and shows the amount of Treasuries in the hands of the public. As spending continues to rise, buyers will want higher interest to invest in such securities, as long as the current spending plans of the US Administration continue at the current pace.  The second chart, again from Goldman Sachs, shows the widespread adoption of AI, with the ratio having more than doubled in less than a year. This should keep tech capex strong, and also should continue to bolster their corporate earnings.  

For equities, be careful not to fall into ‘Buffett’s trap’. He famously said that there were moments when Berkshire Hathaway’s stock was down more than 50%, and nothing was wrong with the company at the same time. Timing and risk management are key. In particular, I have noted that Berkshire Hathaway is losing the Buffett premium, having recently had a hit on valuation and a meaningful underperformance vs the S&P 500. Of course, I remain optimistic in the long term; I have faith in the new CEO, but to follow the Oracle means filling very, very big shoes. The late Angelo Abbondio, a legendary Italian investor, used to say that you can rely on fundamental analysis and on technical analysis, but the most difficult thing was to decide when to prioritise the first and when the second.

Due to the persistent stickiness of inflation, monetary policy is again taking centre stage. Obviously, we should not overlook geopolitical scenarios in Ukraine and the Middle East, although it is quieter now on both fronts. Any escalation would be negative for the markets. Let’s see if President Trump can possibly broker a peace agreement between Ukraine and Russia. 

I now recommend a long position in equities and a neutral position on US bonds. For EU Bonds, I advise going long, while I still suggest putting together a portfolio that includes the yield of Italian Bonds and the safety of German Bunds, without neglecting Corporate Bonds. 

There are three main headline risks to what is otherwise a constructive view for 2025: i) the US economy falling into a recession or revenue/earnings not matching forecasts; ii) any damage to the economy and trade done from Trumponomics, tariffs, and resurging inflation; iii) any negative geopolitical outcome (which could see an expansion of the current conflicts); and iv) valuations, which are nearing levels only seen once before (at least during my lifetime!). 

Japan managed to perform much better in the last weeks. The revaluation of the USD brought new shine to the local stock market, which has a more palatable valuation than its US counterpart. You still have to deal with a hawkish BOJ – although I would think that they would prefer to hold off hiking, given the current environment. For the time being, the cautious stance persists, although the bounce is noted, and it could be extended given the more positive news and in the event of further capital flows out of the US.

Finally, Tom thinks that the current USD weakness can continue if the current maneuvering on trade goes on, but he’s positive if there is a breakthrough, as it looks like the one with China. Watch this space. At the moment, I think the 1.1580 EUR bottom will be tested again, after a negative move last week following skirmishes with China. Should it break, that will open a door to further devaluation with 1.20 as the next target.

Portfolios

Finally, I want to introduce three portfolios that Tom and I published on Wikifolio. Tom’s a multi-asset portfolio, whereas the one I manage (with substantial input from Tom) is a global income and growth with a heavy US tilt. The third one is on Italian Equities. Check them out!

https://www.wikifolio.com/en/int/w/wf00inf8ig

Tom’s Multi-Asset Portfolio is up 16.4% in about 1 1/2 years, with a Sharpe Ratio of 1.0

https://www.wikifolio.com/en/int/w/wf000ipggi

Our Global Income and Growth Portfolio is up 17.5% in about 1 1/2 years, with a Sharpe Ratio of 0.6

https://www.wikifolio.com/en/int/w/wf00ipiteq

My Italian Equities Portfolio is up 36.8% in the last year and has outperformed the FTSE MIB Index by 1200+ bp in this timeframe, with a Sharpe Ratio of 1.6

Consulting

Finally, I have officially become an Italian Independent Financial Consultant (Consulente Finanziario Autonomo), registered with the Italian OCF since 19 March 2024 (protocol 2425). If you are interested in my financial advice or simply for more information, please contact me at giorgio.vintani@inflectionpoint.blog

Consulting accounts usually start from EUR 100,000. Please note that you should be based in Italy to avail yourself of this service. If you are interested, please drop me an email. I am happy to send you my presentation and track record upon request.

Happy trading, and see you next week!

InflectionPoint

Disclaimer

All views expressed on this site are my own and do not represent the opinions of any entity with which I have been, am now, or will be affiliated. I assume no responsibility for any errors or omissions in the content of this site, and there is no guarantee for completeness or accuracy. The content is food for thought, and it is not meant to be a solicitation to trade or invest. Readers should perform their own investment analysis and research and/or seek the advice of a licensed professional with direct knowledge of the reader’s specific risk profile characteristics.