June 2025 market update

Introduction 

Global equity markets advanced over the month of June. A framework for a U.S.-China trade deal, along with ongoing negotiations between Canada and the U.S., and the European Union and the U.S., lifted sentiment towards global equities. The U.S.-China deal was particularly notable, with ongoing tensions between the two economic giants expected to bring down global economic activity. 

Several global central banks held steady in June as they continued to monitor the impact of tariffs on their domestic economies. Inflation continued to subside, but the threat of higher inflationary pressures persists in response to tariffs. In Canada, data pointed to slower economic activity amid trade tensions with Canada’s largest trade partner. The Bank of Canada held steady at its June meeting. 

The S&P/TSX Composite Index moved higher in June and reached a new record high, led by the Health Care sector. U.S. equities also advanced. The price of gold finished largely unchanged, while the price of oil increased. Yields on 10-year Government of Canada bonds ticked higher, while the yield on 10-year U.S. Treasury bonds declined. Yields on both sides of the border were choppy as economic, trade and geopolitical developments shifted. 

Canadian household spending waning 

Economic uncertainty, lower consumer confidence and fragile finances appear to be weighing on Canadian households in the second quarter of 2025. Retail spending in Canada rose by 0.3% in April. However, the data underlying that result points to some looming weakness. April’s increase was driven by a 1.9% increase in sales for motor vehicles and parts. This increase came as Canadians purchased automobiles before automotive tariffs came into effect, which would have made them pricier. Stripping out sales of automobiles and parts, retail sales declined by 0.3%. The outlook for May is equally troubling. Statistics Canada estimated that retail sales dropped by 1.1% in May, which would be the largest monthly decline since March 2023. A pullback in demand could weigh on growth in the second quarter, as will a significant decline in exports. Canada’s economy ran a record trade deficit of $7.14 billion in April. Exports were dragged down sharply in response to a 15% decline in exports to the U.S. Given sizeable tariffs on many key goods, orders from U.S. purchasers slowed considerably. This impact from tariffs has also been evident in Canada’s manufacturing sector, which has seen a drop in sales and output, leading to a contraction in the industry. Late in the month, U.S. President Donald Trump halted trade talks in response to the digital services tax, which the Canadian government subsequently withdrew. In response, both sides returned to the table, hoping that a trade deal could be reached by July 21. 

U.S.-China trade deal framework reached 

After months of tense trade tensions and exchanges, the U.S. and China came together to create a framework for a trade deal. As of the end of June, the deal hadn’t been fully approved by government leaders, but approval did appear imminent. Both economic powerhouses put significant tariffs on one another as neither backed down from their trade war. However, a delegation of officials from both countries met in Switzerland in May, where it was decided to lower tariffs as they continued to discuss trade and national security. In mid-June, U.S. and Chinese officials met in London, where they reached a framework for a trade deal. This removed higher tariffs, but the deal includes a 55% tariff on Chinese goods and a 10% levy on U.S. goods. The deal also makes it easier for the U.S. to purchase rare earths, which are a key mineral for manufacturing and producing chips. It also eases technology restrictions. Separately, Beijing announced it was confident it could shift its economy to become more consumer-driven, saying this would help it be a stable force for global trade activity. If China were to increase domestic demand, there may be space for higher imports. Tensions between the world’s two largest economies rattled markets and put the health of the global economy into question. The two economies reaching an outline of a deal excited investors and helped push global equity markets higher over the month. 

The U.S. Federal Reserve Board is carefully monitoring inflation 

At its June meeting, the U.S. Federal Reserve Board (“Fed”) held its federal funds rate steady at a target range of 4.25%–4.50%. This marked the Fed’s fourth consecutive rate hold as it sees relatively solid economic growth, a stable labour market and inflation still above its 2% target. The Fed also noted that it is closely monitoring trade developments and how they impact the U.S. economy. While higher reciprocal tariffs were paused and trade deals are being reached, tariffs still remain in place and are taking time to filter through the economy. The Fed continues to express some concern that consumer prices could increase, which would counter its expectations for inflation from earlier this year. So, the question on the minds of investors is when the Fed will lower interest rates again. Some thought it could be as early as July, but during congressional testimony, Fed Chair Jerome Powell said the Fed can afford to be patient given prevailing economic conditions. He also noted that if inflation does come down further, the Fed is willing to lower interest rates. A rate cut would be welcome news for President Trump, who has been critical of Chair Powell and believes he has waited too long to lower interest rates again. Powell has been steadfast in the Fed’s independence and would like to consider all economic data, including the impact of tariffs, before adjusting monetary policy. Markets are expecting a rate cut from the Fed sometime this year. 

Oil prices see wide swings 

The price of oil saw several wide swings over the month in response to geopolitical tensions, shifting trade policy and supply-demand dynamics. At its monthly meeting at the beginning of June, the Organization of the Petroleum Exporting Countries and allies (“OPEC+”) announced it would maintain its production increases. After scaling back production for several years prior, OPEC+ has decided to increase production in 2025, helping to support and balance the market. Oil prices were stable from there, with demand expected to pick up as several large economies made trade deals with the U.S., which was expected to help economic activity. However, geopolitical tensions heightened mid-month in the Middle East, putting supply into question and sending prices plummeting. Middle East tensions then de-escalated, and supply wasn’t impacted. This helped support prices, which held relatively steady over the remainder of the month. The price of oil and other commodities could be susceptible to wide swings in response to prevailing economic and political conditions. While oil prices were stable near the end of the month, oil prices could see more swings as trade policy and geopolitical tensions evolve. The Energy sector on the S&P/TSX Composite Index advanced over the month, benefiting from higher oil prices.