Shesa's Weekend Updates: 6/22/25

Current Market Situation

First thing first, yesterday evening Trump said that U.S. had a very successful attack on the three Nuclear sites in Iran, including Fordow, Natanz, and Esfahan. So, we do not know how this Geopolitical situation will escalate. If there is no escalation then Stock Market should bounce back. If there is further escalation then Market may react unfavorably as it does not like uncertainties. War is not good for any country. Now that U.S has got involved there would be some panic in the market. However, in my experience, usually it does not have a very lasting impact on the stock market and mostly it provides good buying opportunities for the long term. The stock futures does not look terrible and that's a very good sign. Having said that, we will see if it takes further grim direction. Let's keep the finger crossed and see how this one go..

Last week, the stock market did not have much action due to the escalations of Geopolitical situation between Israel and Iran and possible U.S involvement. For the week, the S&P 500 was down about -0.2%. The Dow was up 0.02% gain on the week, and the Nasdaq was up 0.2% for the week.

The Federal Reserve kept its key borrowing rate targeted in a range between 4.25%-4.5%. This rate has been since December 2024. It also expects inflation to remain elevated and sees lower economic growth ahead and two rate cuts are still the possibility later this year. But as I said in my WhatsApp group, I don’t believe the FED until I see the results!! Trump has been criticizing J Powell many times and said to nominate his replacement soon. But please note that Powell's term ends on May 15, 2026.

A few important events that I anticipate this week

• Keeping an Eye on Israel vs. Iran vs. U.S: I already said this on my opening remark.

• Robotaxi Launch: Today Tesla (TSLA) launched its first Robotaxi in Austin, Texas using Tesla's Full Self-Driving (FSD) Unsupervised. There were many riders who took the ride with a flat fees of $4.20. The public event is expected to take place later. Subsequently, more would be added and expand to other cities like San Francisco and others. If it’s successful then Tesla stock would be a compelling stock for the long term investors. This is a very important event for Tesla as lots of skeptics doubted the creditability of Elon Musk. BTW: The first autonomous delivery from factory to customer is set for Jun 28.

• Russell reconstitution: Based on the ranking and re-evaluation, companies are added to, removed from, or moved between the different Russell or Small Cap indexes. So, those small cap stocks that will be added to the index should go up or go up significantly and those removed would lose. The Russell Reconstitution in 2025 becomes effective after the market close on Friday, June 27, 2025 and would start trading from June 30. 

• End of Quarter Rebalancing: The portfolio adjustments made by investors, particularly institutional investors like mutual funds and pension funds, to maintain their desired asset allocation. We may see some institutions will be adding/accumulating/removing some equities based on their performances. Hence, fundamentally superior with good momentum stocks are expected to go higher at the end of quarter, this week. 

Economic Reports Last week

Retail Sales (May 2025):

• Actual: -0.9% (month-over-month) vs. -0.6% expected. It was up 3.3% (year-over-year)

• Summary: Sales dropped more than anticipated, driven by lower motor vehicle purchases and tariff concerns. Core retail sales (ex-autos, gas, etc.) rose 0.4%, slightly above expectations.

Home Builders Report (NAHB Housing Market Index, May 2025):

• Actual: 32 vs. Expected: 36

• Summary: Builder confidence fell below expectations, reflecting high mortgage rates (6.95%), economic uncertainty, and tariff-driven cost increases. New home sales surged in April but slowed in May due to affordability issues and high inventory.

Stocks to watch this week

TSLA, META, NFLX, CRWV, NVDA, AVGO, SOXL, TQQQ, CVNA, TEM, QUBT

Key Economic Report this week

MON, JUNE 23: Existing Home Sales

TUE, JUNE 24: Consumer Confidence 

WED, JUNE 25: New home sales

THU, JUNE 26: GDP (second revision)

FRI, JUNE 29: Fed preferred PCE index

Big and Beautiful Tax Bill

The congress is planning to pass Trump's big and beautiful tax bill by July 3rd long weekend.  However, I am not very optimistic that it would happen by then visualizing the current Geopolitical situation which has some division within the party after U.S striking Iran.

U.S Debt: Over the last 10 years, US Federal Government Tax Revenue has increased 60% to over $5 Trillion while Government Spending has increased 97% to over $7 Trillion. The result: a doubling of the US National Debt from $18 trillion to $36 trillion.

Answering some questions asked in the WhatsApp group

What is Dovish: Favoring low interest rates and economic stimulus to boost growth which is favorable for the stock market.

What is Hawkish: Prioritizing high interest rates to control inflation, often at the cost of slower economic growth. This is NOT favorable for the stock market.

What are Continuation funds? These are private equities that extend the holding period of assets from an existing fund nearing its end. They allow fund managers to retain high-performing assets, provide liquidity to investors who want to exit, and raise new capital from existing or new investors to support future growth.

Have a good rest of your weekend!