The Independence Day holiday-shortened trading week saw the S&P 500 (Index: SPX) power higher to reach new record highs throughout the trading week. Overall, the index rose 1.7% over its preceding week's close to end the week at 6,279.40.

Several market-moving news events combined to produce this positive result for S&P 500 investors. On Monday, weekend headlines that Canada pulled the plug on its digital services tax boosted U.S. tech stocks after President Trump had suspended trade talks with Canada because of the new tax.

After taking a proverbial 'breather' on Tuesday, Wednesday saw the announcement of a major trade deal with Vietnam, which pushed the market higher. Finally, Thursday saw a better-than-expected jobs report and also the U.S. Congress' passage of President Trump's tax bill, which avoids a massive tax increase from taking effect in 2026 because of the expiration of President Trump's 2017 tax cuts.

And that doesn't even include the noise around when and by how much the Federal Reserve will cut U.S. interest rates!

The latest update of the alternative futures chart shows the rising trajectory of the S&P 500 during the week that was.

Although the index' trajectory is overlapping the trajectory associated with investors focusing on the distant future quarter of 2026-Q2, we think based on the recent history of the index and the context provided by the week's market moving headlines that investors are still fixed on 2025-Q4 in setting current day stock prices.

By recent history, we observe that investors shifted their attention to 2025-Q4 several weeks ago, with the level of the S&P 500 consistently running to the underside of that alternative path by a small percentage. We think that's continued in this past week, mainly because nothing in the contemporary headlines points to any new information that would compel investors to shift their focus out to a more distant point of time in the future.

What the headlines of recent weeks do indicate is quite a lot of attention on how the Federal Reserve will be setting the U.S.' Federal Funds Rate through the rest of 2025, particularly with respect to how many rate cuts there will be in the fourth quarter.

Speaking of which, here are the week's market moving headlines:

Monday, 30 June 2025

• Signs and portents for the U.S. economy:
• US narrows trade focus to secure deals before Trump's tariff deadline, FT reports
• India to finalise interim trade deal with US as early as this week, FT reports
• Canada scrapping tax on US tech firms after Trump suspends talks
• US to restart trade negotiations with Canada immediately, White House says
• Oil edges down on easing Middle East risks but gains for a second month
• US crude oil output hit record in April, EIA data shows
• Fed minions called “too late” in not delivering interest rate cuts, don’t think the economy will experience stagflation:
• Trump hammers Powell again as Bessent mulls Fed power transition timeline
• White House says Trump wrote Powell to urge lower rates
• Fed's Goolsbee sees no stagflation but 'definitely' things could get worse
• Growth signs, bigger stimulus developing in China:
• China's factory activity returns to growth in June, Caixin PMI shows
• China's weak factory activity maintains pressure for more stimulus as tariff risks weigh
• ECB minions worry about inflation, ready to stand by for action, getting ready to accept U.S. tariffs on Eurozone goods:
• Euro zone facing increased inflation volatility, Lagarde says
• ECB ready for 'forceful' action in world of inflation swings
• EU to accept Trump's universal tariff but seeks key exemptions, Bloomberg News reports
• S&P tops 6,200 for the first time, Nasdaq seizes all-time high as trade deals progress
• S&P 500, Nasdaq close at record highs, cap best quarter in over a year

Tuesday, 1 July 2025

• Signs and portents for the U.S. economy:
• Trump says he won't extend July 9 trade deadline, expresses doubt on Japan deal
• US job market surprises with increased openings in May
• Oil settles up on signs of strong demand; investors await OPEC+ decision
• Fed minions signal they’ll think about cutting rates in July, but are still expected to wait until September:
• Trump Gives Fed New Mandate
• Powell signals openness to July US interest rate cut
• Fed rate cut bets rise after Powell doesn't rule out July
• Powell reiterates Fed will wait for more data before cutting rates
• Fed hawks and doves: what US central bankers are saying
• ECB minions hit Eurozone inflation target, ready to pause interest rate cuts, thinking about devaluing Euro currency:
• Eurozone inflation rises to ECB’s 2% target
• ECB can afford to hold off on further rate changes for a while, Müller says
• ECB more likely to wait until year-end to cut rates, Simkus says
• ECB policymakers set pain threshold for euro rise in weak economy
• Wall Street's record-breaking rally takes a breather as S&P, Nasdaq end lower

Wednesday, 2 July 2025

• Signs and portents for the U.S. economy:
• Trump says US has struck trade deal with Vietnam
• Oil prices jump 3% as Iran suspends cooperation with UN nuclear watchdog
• Oil, gas activity contracted in Q2 on higher US steel tariffs, Dallas Fed survey shows
• Fed minions still expected to resume cutting U.S. interest rates in September 2025:
• US rate futures raise easing bets for July, fully prices in September cut
• Bigger trouble developing in China:
• China's top leaders vow crackdown on price wars as deflation risks mount
• China Communist Party magazine calls for crackdown on price wars
• BOJ minions thinking about pausing or not pausing Japan's interest rate hikes:
• BOJ's Ueda says underlying inflation still below 2%
• New BOJ board member warns against rushing into rate hikes
• ECB minions ambivalent on how many more rate cuts they'll deliver:
• ECB should consider mildly supportive stance as on low growth, inflation, Wunsch says
• S&P 500, Nasdaq close up on Vietnam trade deal, tech stocks
• Wall Street ends at a record high after U.S-Vietnam trade deal
• Shares of health insurers fall sharply as patient care costs jump
• US banks announce big shareholder payouts as Fed eases stress tests

Thursday, 3 July 2025

• Signs and portents for the U.S. economy:
• US factory orders rebound in May on strong aircraft demand
• US trade deficit widens in May on weak exports
• Instant view: US job growth beats expectations in June
• Oil prices ease on US tariff worries and expected OPEC+ output boost
• Republicans muscle Trump's sweeping tax-cut and spending bill through Congress
• In July 4 ceremony, Trump signs tax and spending bill into law
• Fed minions say they will have to wait up to a year to see if tariffs will cause inflation they predicted:
• Fed's Bostic: Adjustment to Trump policies could take a year or more
• Bigger trouble, U.S. trade deal developing in China:
• China's services activity growth hits 9-month low in June, shows Caixin PMI
• US paves way to resume ethane exports to China amid trade truce
• BOJ minions split difference, will pause then resume hiking Japan's interest rates:
• BOJ policymaker calls for resuming rate hikes after temporary pause
• ECB minions see some Eurozone economic growth, worry about not having enough inflation:
• Euro zone services sector returned to modest growth in June, PMI shows
• ECB's Wunsch: Inflation risk more downward than upward
• S&P 500 ends about 20 points shy of 6,300 level ahead of Independence Day holiday weekend
• S&P 500, Nasdaq touch new peaks after strong labor data; Nvidia hits all-time high

The CME Group's FedWatch Tool projects the Fed will continue holding the Federal Funds Rate in a target range of 4.25-4.50% until its 17 September (2025-Q3) meeting, when it is expected to cut the rate by a quarter percent. Beyond that date, the FedWatch tool anticipates additional quarter point rate cuts on 10 December (2025-Q4) and on 28 January (2026-Q1), which is a little less aggressive than its projections from a week earlier, and is why we think 2025-Q4 is still the dominant focal point on investors' time horizon.

The Atlanta Fed's GDPNow tool projection of real GDP growth in the U.S. during the current quarter of 2025-Q2 dipped to +2.6% from the +2.9% level forecast the previous week.

Image credit: Microsoft Copilot Designer. Prompt: "An editorial cartoon of a Wall Street bull celebrating the S&P 500 hitting new record highs".

It is sometimes difficult to express how big an event the Fourth of July is within the United States. The annual celebration of the nation's founding through its Declaration of Independence from the United Kingdom in 1776 features events like parades, barbecues, games, picnics, sporting events, concerts and fireworks have been core elements of the day from the beginning.

You don't have to take our word for it. Here's an excerpt of a letter future U.S. President John Adams wrote to his wife Abigail on July 3, 1776, the day after the Continental Congress voted to officially sever the rule of King George III over the thirteen American colonies, about how he thought the people of the new nation should celebrate their Independence as a new nation:

The Second Day of July 1776, will be the most memorable Epocha, in the History of America. — I am apt to believe that it will be celebrated, by succeeding Generations, as the great anniversary Festival. It ought to be commemorated, as the Day of Deliverance by solemn Acts of Devotion to God Almighty. It ought to be solemnized with Pomp and Parade, with Shews, Games, Sports, Guns, Bells, Bonfires and Illuminations from one End of this Continent to the other from this Time forward forever more.

Adams was mostly right. He missed the date that would mark the official birth of the United States as an independent country. The Continental Congress got hung up on working out the language of the official Declaration of Independence document and didn't approve and sign it until the Fourth of July, which became Independence Day on the American calendar.

249 years later, Americans still follow Adams' plan for how to celebrate the event. A fantastic example of the scale of the celebration can be found from just five years ago, when the Coronavirus Pandemic had led many state and local governments to sharply restrict gatherings and activities.

But that didn't stop 2020's Fourth of July's fireworks. Attractions 360 flew a camera on a drone to capture footage of fireworks being launch throughout Los Angeles' San Gabriel Valley. Here's their video:

It is pretty amazing to see how far and wide the distribution of fireworks being shot off were across the valley. More than that however, the video gives a sense of the scale of Fourth of July celebrations in just one part of one American city during 2020's pandemic when events like these were limited. Multiply what the video shows by all the Fourth of July celebrations taking place in towns, cities, and other parts of the country to get a better idea of how big Independence Day still is for Americans.

Have a happy Fourth of July in 2025!

The United States' new home affordability crisis worsened slightly in May 2025, as a higher median new home sale price combined with an increase in the nation's average mortgage rate.

The negative development means the monthly mortgage payment for the median new home sold in the United States once again consumes more than 36% of the pre-tax income of a household earning the median household income. May 2025 represents the 38th consecutive month in which the typical new home sold in the U.S. has been beyond the affordable grasp of the typical American household.

Here are the numbers being that assessment for May 2025. The initial estimate of the median sale price of a new home sold in the U.S. during the month is $426,600. Meanwhile, the 30-year conventional fixed rate mortgage carried an average interest rate of 6.82% during the month. For a household taking out a mortgage with a zero-down payment [1], the principal and interest portion of their mortgage payment would total $2,423.

That mortgage payment would consume about 40.1% of the monthly income earned by a household at the exact middle of the U.S. income distribution in May 2025. As such, it exceeds the upper threshold of affordability that lenders have historically used to determine whether they will loan money to a household that has no other debt. For households that do carry other debt, lenders prefer their monthly mortgage payments consume no more than 28% of their pre-tax household income. Mortgage borrowers have more financial resilience to deal with unexpected expenses when their mortgage payments fall below these affordability thresholds.

The latest update of our chart tracks the changing relative affordability of the typical new home sold in the U.S. is for the typical American household with respect to the mortgage lending industry's key affordability thresholds from January 2000 through May 2025.

Looking ahead to June 2025, the interest rate for the average 30-year conventional fixed rate mortgage held steady at 6.82%, which means borrowing costs remain elevated. With mortgage rates stuck, for the affordability of new homes to improve, one or more of the following two things would need to happen:

• A decline in the price of the median new home sold in the U.S.
• A significant increase in the income earned by the median household.

About the New Home Affordability Crisis

The affordability crisis for new homes has its origin in the high inflation that was unleashed by the Biden-Harris administration's policies in March 2021. Although it rose slowly at first, the cost of monthly mortgage payment began to skyrocket after December 2021. As a percentage of median household income, the monthly mortgage payment for a new home climbed above the key 36% threshold of relative affordability in April 2022, remaining above it in every month since.

Notes

[1] We use the zero-down payment scenario because it provides a simple way to account for the opportunity costs of paying a down payment when buying a new home for many homebuyers. Meanwhile, there are several lending programs for qualified homebuyers that do provide a zero-down payment option to try to make buying a home more affordable.

References

U.S. Census Bureau. New Residential Sales Historical Data. Houses Sold. [Excel Spreadsheet]. Accessed 25 June 2025. 

U.S. Census Bureau. New Residential Sales Historical Data. Median and Average Sale Price of Houses Sold. [Excel Spreadsheet]. Accessed 25 June 2025. 

Freddie Mac. 30-Year Fixed Rate Mortgages Since 1971. [Online Database]. Accessed 27 July 2025. Note: Starting from December 2022, the estimated monthly mortgage rate is taken as the average of weekly 30-year conventional mortgage rates recorded during the calendar month.

Image Credit: Microsoft Copilot Designer. Prompt: "An editorial cartoon of a sign advertising a new home for sale with a gasoline pump meter labeled 'MONTHLY MORTGAGE PAYMENT'", which we followed up with a second prompt: "Remove the nozzle and hose from the gas pump. Also change the number in the meter to 2423".

June 2025 was another net-negative month for the dividend paying stocks of the U.S. stock market.

That's based on the dividend metadata compiled for the entire market by Standard & Poor. When we add up all the favorable year-over-year dividend actions like dividend increases, extra dividends and resumptions during the month and then subtract all the unfavorable actions, like announced dividend decreases, the resulting single number that summarizes all the dividend changes of June 2025 is -4.

That's an improvement over the much more negative result we reported for May 2025. While still negative, the underlying data points to a mixed picture for U.S. dividend paying firms. The good news is that fewer firms announced reduced dividends than last month, which was tempered by the bad news of fewer firms announcing dividend rises.

All of June 2024's favorable and unfavorable dividend actions are tallied in the following table, which shows how much they changed since June 2024 (year-over-year) and since May 2025 (month-over-month).

The following chart tracks the monthly counts of dividend increases and decreases from January 2004 through June 2025:

The chart reveals the number of firms announcing decreased dividends in June 2025 remains well below the threshold that indicates recessionary conditions are present within the U.S. economy. However, the more-than-two-year downtrend for dividend increases shown on the chart suggests an ongoing tightening operating environment for firms, which are finding it harder to grow their dividends and, by extension, their businesses.

The next chart shows how the dividend increases and decreases reported during the just-completed 2025-Q2 compares with each of the preceding four quarters:

This chart emphasizes the year-over-year reduction in the number of dividend increases between 2024-Q2 and 2025-Q2.

References

Standard and Poor. S&P Market Attributes Web File. [Excel Spreadsheet]. Accessed 1 July 2025.

Image Credit: Microsoft Copilot Designer. Prompt: "An editorial cartoon of a Wall Street bull and bear playing a casino game in which a spinning wheel with two halves, one named 'NET POSITIVE' and the other named 'NET NEGATIVE' has settled on the 'NET NEGATIVE' side", which we followed up with a second prompt: "Add a sign labeled 'DIVIDEND METADATA' above the wheel. Also make the picture more colorful."

Motio Research's initial estimate of U.S. median household income in May 2025 is $83,150. This figure is $230 (0.3%) higher than the firm's initial estimate of median household income of $82,920 in April 2025.

These estimates are based on income data collected by the U.S. Census Bureau through its monthly Current Population Survey. This survey is conducted during the week containing the 12th day of the month following the month in which its data applies. The firm then adjusts its monthly estimates to account for the effects of seasonality and inflation in its data, presenting its results in the form of an index with the median household income of January 2010 assigned a value of 100. The initial value of the firm's U.S. Real Median Household Income Index for May 2025 is 116.7.

The following screenshot of Motio Research's interactive chart shows how this index has changed from January 2010 through May 2025:

The firm's U.S. Real Median Household Income Index last peaked in September 2024 and has been in a slowly falling trend in the months since.

Analyst's Notes

Political Calculations also produces estimates of median household income, which complement Motio Research's survey-based monthly estimates. We derive our estimates using aggregate income data produced by the Bureau of Economic Analysis. Our initial estimate of median household income in May 2025 based upon our alternate methodology is $83,445, which is $172 (or 0.2%) higher than our initial April 2025 estimate of $83,273. Our median household income estimate is $295 (or about 0.4%) higher than Motio Research's May 2025 estimate.

The latest update to Political Calculations' chart tracking Median Household Income in the 21st Century shows the nominal (red) and inflation-adjusted (blue) trends for median household income in the United States from January 2000 through May 2025. The inflation-adjusted figures are presented in terms of constant May 2025 U.S. dollars and are not seasonally adjusted, unlike the data used to produce Motio Research's Household Income index:

Political Calculations' monthly median household income estimates are derived from the Bureau of Economic Analysis' monthly aggregate wage and salary estimates for the U.S. population. In May 2025, the BEA's data underwent small revisions, with January (+0.007%) and February (+0.010%) revised upward and March (-0.016%) and April 2025 (-0.055%) revised downward.

References

U.S. Bureau of Economic Analysis. Table 2.6. Personal Income and Its Disposition, Monthly, Personal Income and Outlays, Not Seasonally Adjusted, Monthly, Middle of Month. Population. [Online Database (via Federal Reserve Economic Data)]. Last Updated: 27 June 2025. Accessed: 27 June 2025.

U.S. Bureau of Economic Analysis. Table 2.6. Personal Income and Its Disposition, Monthly, Personal Income and Outlays, Not Seasonally Adjusted, Monthly, Middle of Month. Compensation of Employees, Received: Wage and Salary Disbursements. [Online Database (via Federal Reserve Economic Data)]. Last Updated: 27 June 2025. Accessed: 27 June 2025.

U.S. Department of Labor Bureau of Labor Statistics. Consumer Price Index, All Urban Consumers - (CPI-U), U.S. City Average, All Items, 1982-84=100. Not seasonally adjusted. [Online Database (via Federal Reserve Economic Data)]. Last Updated: 11 June 2025. Accessed: 11 June 2025.

Image credit: U.S. Census Bureau. We modified the public domain image to make it more generally applicable beyond reporting the median household income from 2022.