The Global Circuit
Market Update: June 2025
We are clearly laying out a cautiously bearish short-term outlook on the broader equity indices, with technical evidence suggesting a developing downtrend in the S&P 500, Dow Jones, and Nasdaq 100. Let’s break this down and add some context, especially if we are trying to digest both the sentiment and the market mechanics behind it.
Key Points from our Analysis
Potential Short-Term Top
The major indices appear to be putting in a short-term top. This isn’t confirmed yet, but signs of weakening breadth and failed follow-through after a rally off the April lows are classic early signals. If the direction of stocks remains bullish and prove us wrong, we will change our viewpoint. We have been hopeful that the powerful rally off the April lows would not in fact turn out to have been a bull trap. Breadth thrusts are typically bullish (many stocks participating in a rally), but in this case, they may have been misleading. When these fail to produce sustained upside, they can be a feature of bull traps. See the pattern developing in the chart below.
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Geopolitical Tailwind Fades
The temporary boost from Trump’s softened China stance didn’t hold markets up for long. This suggests underlying weakness that can't be papered over with short-term headlines. Remember, China will play the long game, and the US will have to fight the short-term political jungle. Passing the BBL from the house (the big, beautiful bill for July 4th) will be a challenge with the Senate pushing back on an increased deficit burden. Oh yah, and the Mid-Terms just around the corner, the Administration is under the gun.
Technical Breakdown Emerging
You're seeing the start of a lower highs and lower lows pattern forming year-to-date—a hallmark of a developing downtrend. Zooming out may soften the visual, but our point is to focus on recent fragility. Having cash on hand is a blessing and provides some downside protection and with our powder dry, opportunities on pull backs will reward those who are patient.
What we will be watching for:
April Lows Retest: If markets move toward those levels again, watch for either support holding (bullish) or a break (bearish confirmation).
Volume and Breadth on Down Days: If declines are on increasing volume and participation, that reinforces the downtrend.
Tech Sector Leadership: Nasdaq 100 failing to maintain leadership could be an early indicator of broader risk-off sentiment.
What we like going forward:
Quality stocks with moats around their business and recurring cash flows that are somewhat recession resistant. Netflix, Uber and Costco for example, all have strong subscription revenues that help buffer the weakness. The Mega Cap tech stocks like Microsoft, Amazon and NVidia have recovered nicely, exhibiting their strong market leadership, while others in the market have not.
Take retailers like Nike and Lululemon, which have been direct beneficiaries of the negative externalities of the tariff trade war. That uncertainty will likely continue as long as Trump continues to sow seeds of doubt around tariff relief with a trade agreement in hand. Just one lonely trade commitment without details and that's the UK, not a ringing endorsement of the administration’s efforts to bolster American exceptionalism. The term floating around Wall Street these days is the "TACO Trade" and I'm not referring to the Mexican Stock market, rather a boy who cries wolf playing out in real time with Donald Trump pausing and delaying the tariff's leaving the markets to ponder how serious can they be. The saying goes “Trump Always Chickens Out".
We are also eagerly watching the bond market for clues, which on the bond side, it’s somewhat more complicated. Positive real yields at the shorter end of the curve this spring made it, so you did not have to wade out into the deep end and risk getting your head handed to you for income and safety. That may change if tariffs begin to show their ill effects with higher cost push inflation to the American consumer, which makes up 70% of GDP of the US and furthering the rise of rates and may need a continued strong labour force to weather this storm. If the economy does not hold then the Fed may be forced to cut rates. This could also be a classic market climbs the wall of worry.
Cash is King for now and so is patience...
The views and opinions expressed in this blog may not reflect those of Harbourfront Wealth Management. While every attempt is made to ensure accuracy - facts and figures are not guaranteed and should not be relied upon as personalized investment advice. We are members of the Canadian investor’s protection fund. and the Canadian Investment Regulatory Organization.
