Weekly Mosaic Update


Top of Mind - Week of June 30, 2025

  • As the second quarter comes to a close, the S&P 500 has successfully climbed “the wall of worry” yet again and is making new highs despite trade policy uncertainty, interest rate volatility, and geopolitical risk experienced over the last three months.
     
  • Uncertainty surrounding tariffs and trade policy sparked a selloff in the equity markets in early April, which nearly sent the S&P 500 into a bear market, down 20% from its previous peak.
     
  • A 90-day pause on the “Liberation Day” reciprocal tariffs (excluding China) was declared a week after the initial proclamation, sending stocks rapidly higher as uncertainty around trade policy receded. By early May, China and the US also agreed to a 90-day halt, giving further cause for optimism.
     
  • Interest rates were also volatile, with the 10-year Treasury yield falling below 4.0% in early April, then jumping above 4.6% by mid-May, before settling around 4.25% by the end of June.
     
  • Geopolitical risk fluctuated as tensions in the Middle East escalated rapidly, driving oil prices from the mid-$60/bbl to the upper $70s/bbl before reverting back to the mid-$60s/bbl.
     
  • Moving into the second half of the year, policy sequencing is likely to shift positively as markets have largely moved past trade policy uncertainty and begun to focus on the potential benefits of fiscal policy expansion and continued deregulation.

 

Top of Mind - Week of June 23, 2025

  • Markets are breathing a sigh of relief as it appears Iran telegraphed a strike on US assets in the region in response to the US bombing of Iranian nuclear sites over the weekend.
     
  • The price of oil plunged in response to this “measured” retaliation. Equity and credit markets are moving higher as markets view this development in the same vein as Iran’s reaction to the assassination of General Soleimani in 2020.
     
  • This is a welcomed development as the flow of oil through the Strait of Hormuz, which accounts for roughly 20% of the world’s daily consumption, remains uninterrupted for the moment.
     
  • While this appears to be a de-escalation between the US and Iran, we are back to where we were on Friday with Israel and Iran continuing to trade blows.
     
  • Despite this seemingly positive development, the risk of higher oil prices and corresponding negative impacts on markets and inflation remain as tensions between Israel and Iran persist.
     
  • A prolonged closure of the Strait of Hormuz is likely a low probability event as it would be counterproductive to Iran’s economic needs. The bigger risk lies in the possible targeting of Iranian export facilities, leading to structurally higher energy prices.

 

Top of Mind - Week of June 16, 2025

  • When the Federal Reserve meets this week, it will have yet another reason to continue its “wait-and-see” approach before resuming interest cuts as oil prices leapt higher on Friday in response to the Israeli attack on Iran. 
     
  • For monetary policymakers across the globe, lower energy prices have been a welcome relief, as they helped alleviate a portion of the lingering inflationary pressure. However, with tensions reigniting in the Middle East, the continued trajectory of lower energy prices is now in question.
     
  • Should energy prices continue to rise, it will be incrementally more problematic for energy importers such as Europe and Japan than for the US, which is a large energy producer.
     
  • Before the conflict in the Middle East broke out, the European Central Bank (ECB) had delivered four interest rate cuts to their policy rate as inflation in the EU had been moving comfortably back towards target, while the Bank of Japan (BOJ) had been the only major central bank working to tighten monetary policy this year as inflation in Japan has trended higher. 
     
  • Provided the renewed level of uncertainty driven by the Israel-Iran conflict, the Federal Reserve may not be the only central bank instituting a “wait-and-see” approach moving forward. 

 

Top of Mind - Week of June 9, 2025

  • As the bellwether 10-year Treasury yield hovers around 4.50%, markets are becoming increasingly sensitive to estimates of when the next interest rate cut from the Federal Reserve (Fed) might arrive. 
     
  • After raising the policy rate from a range of 0-0.25% to 5.25-5.50% over the course of 18 months, the Fed has cut interest rates to a level of 4.25-4.50% but has been on hold since last December, leaving rates higher for longer.
     
  • Although inflationary data has softened, the Fed is taking a cautious wait-and-see approach given the uncertain price impacts from tariffs. This puts a focus on the other side of their dual mandate, maintaining full employment.
     
  • The labor market remains in a decent spot as Friday’s report from the Bureau of Labor Statistics pegged the unemployment rate at 4.2%, a level that is unlikely to concern the Fed as the rate isn’t showing signs of imminent weakness and has remained inside a range of 4.0-4.3% for the last twelve months.
     
  • Any indication of weakness in the labor market will likely be well-received by equity markets, as expectations of interest rate cuts are brought forward, compounding the incremental positive impact of the long and variable lags of the 100 basis points of interest rate cuts delivered over the final months of last year. 

 

Top of Mind - Week of June 2, 2025

  • May has come and gone, and those who followed the old adage of “sell in May and go away” are off to a rough start. The flagship S&P 500 index posted its strongest monthly gain since November of 2023, shaking off the tariff-induced April sell-off. 
     
  • Global equity markets performed well in May, posting solid absolute returns. The Russell 1000 Growth Index led the pack at +8.9%, outpacing the Russell 1000 Value Index at +3.5% and international equities at +4.6%, as measured by the MSCI ACWI Ex USA.
     
  • Fixed income returns were more muted for the month, with the Bloomberg Aggregate Bond Index falling -0.7%. The positive impact from credit spreads tightening throughout May was dampened by the yield curve shifting higher, as Treasury yields beyond 1-year moved up by 20-30 basis points. 
     
  • Moving into June, we anticipate that markets will remain volatile as investors focus on the magnitude of the fiscal impact that the “One Big Beautiful Bill” can deliver, as well as possible deregulation, and the looming end of the initial 90-day pause in early July. Geopolitical risk will also be front and center as a near-term negotiated peace between Russia and Ukraine appears to be off the table, given this weekend’s escalation.

 

Top of Mind - Week of May 26, 2025

  • Despite the standing 90-day pause on reciprocal tariffs, duties of 50% on goods imported from the European Union (EU) were announced on Friday, scheduled to take effect on June 1st. 
     
  • As trade policy uncertainty has resurfaced for many investors, equity markets have reacted negatively to the announcement; however, the tone has changed since Friday.
     
  • Fast forward through the long weekend, and the June 1st effective date has been pushed back to July 9th to allow time for negotiations after a constructive call between President Trump and EU counterpart Ursula von der Leyen.
     
  • The on-again, off-again nature of the tariffs and corresponding trade deal announcements will likely continue, especially after receiving such a rapid response from the EU in light of Friday’s announcement.
     
  • While trade policy rhetoric will continue, trade headline impact on markets will likely recede as market participants turn their focus on potential changes to tax policy (with the One Big Bill now in the hands of the Senate after passing through the House) and deregulation, both anticipated to ramp up in the second half of this year.
“Madison” and/or “Madison Investments” is the unifying tradename of Madison Investment Holdings, Inc., Madison Asset Management, LLC (“MAM”), and Madison Investment Advisors, LLC (“MIA”). MAM and MIA are registered as investment advisers with the U.S. Securities and Exchange Commission. Madison Funds are distributed by MFD Distributor, LLC. MFD Distributor, LLC is registered with the U.S. Securities and Exchange Commission as a broker-dealer and is a member firm of the Financial Industry Regulatory Authority. The home office for each firm listed above is 550 Science Drive, Madison, WI 53711. Madison’s toll-free number is 800-767-0300.

Any performance data shown represents past performance. Past performance is no guarantee of future results.

Non-deposit investment products are not federally insured, involve investment risk, may lose value and are not obligations of, or guaranteed by, any financial institution. Investment returns and principal value will fluctuate.

This website is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security and is not investment advice.

All investing involves risks including the possible loss of principal. There can be no assurance the asset allocation portfolios will achieve their investment objectives. The portfolios may invest in equities which are subject to market volatility. In addition to the general risk of investing, the portfolio is subject to additional risks including investing in bond and debt securities, which includes credit risk, prepayment risk and interest rate risk. When interest rates rise, bond prices generally fall. Securities rated below investment grade are more sensitive to economic, political and adverse development changes. International equities involve risks of economic and political instability, market liquidity, currency volatility and differences in accounting standards.

Indices are unmanaged. An investor cannot invest directly in an index. They are shown for illustrative purposes only, and do not represent the performance of any specific investment. Index returns do not include any expenses, fees or sales charges, which would lower performance.

The S&P 500® Index is a large-cap market index that measures the performance of a representative sample of 500 leading companies in leading industries in the U.S.

The Bloomberg US Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, USD-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, mortgage-backed securities, asset-backed securities, and corporate

Russell 1000® Growth Index is designed to track those securities within the broader Russell 1000 Index that FTSE Russell has determined exhibit growth characteristics. Russell Investment Group is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Russell Investment Group.

The MSCI ACWI ex USA Index captures large and mid cap representation across 22 of 23 Developed Markets countries (excluding the US) and 23 Emerging Markets countries. With 1,843 constituents, the index covers approximately 85% of the global equity opportunity set outside the US.

The Magnificent Seven stocks are a group of high-performing and influential companies in the U.S. stock market: Alphabet, Amazon, Apple, Meta Platforms, Microsoft, NVIDIA, and Tesla.

The harmonized index of consumer prices, abbreviated as HICP, is the consumer price index as it is calculated in the European Union (EU), according to a harmonized approach and a single set of definitions. It is mainly used to measure inflation.

The federal funds rate is the target interest rate range set by the Federal Open Market Committee (FOMC) for banks to lend or borrow excess reserves overnight. It influences monetary and financial conditions, short-term interest rates, and the stock market.

The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.

The National Federation of Independent Business (NFIB) Small Business Optimism Index is a combination of ten seasonally adjusted components. It provides an indication of the health of small businesses in the United States.

Purchasing Managers’ Index™ (PMI™) is a survey-based economic indicator designed to provide a timely insight into business conditions.

The Coincident Economic Activity Index includes four indicators: nonfarm payroll employment, the unemployment rate, average hours worked in manufacturing and wages and salaries.

Bond Spread is the difference between yields on differing debt instruments of varying maturities, credit ratings, and risk, calculated by deducting the yield of one instrument from another.\

A basis point is one hundredth of a percent.

Yield Curve is a line that plots yields (interest rates) of bonds having equal credit quality but differing maturity dates. The slope of the yield curve gives an idea of future interest rate changes and economic activity. There are three main types of yield curve shapes: normal (upward-sloping curve), inverted (downward-sloping curve), and flat.