Market Insights: US Equities Surge Amid Global Economic Developments

On June 30, 2025, global equities displayed a positive trend as tensions in the Middle East subsided following a U.S. military strike on Iranian nuclear facilities earlier that week. A ceasefire agreement between Israel and Iran was reached on Tuesday, potentially stabilizing the geopolitical landscape. This development marked a significant shift in investor sentiment, leading to a rally in U.S. equities, which had previously been under pressure.

The recent NATO summit in The Hague also contributed to market optimism, where leaders committed to increasing their defense budgets to 5% of GDP, responding to long-standing demands from the United States. President Donald Trump has advocated for heightened defense spending among NATO allies, emphasizing the need for collective security amidst rising global threats.

Economic indicators from the U.S. have shown signs of resilience. The S&P Global Manufacturing and Services Purchasing Managers’ Index (PMI) data, released on June 23, 2025, indicated that services recorded a PMI of 53.1, exceeding the expected 53.0, while manufacturing reached 52, surpassing the anticipated 51. This follows a trend of improving consumer sentiment, as reported by Michigan's consumer sentiment index, which rebounded for the first time in six months, suggesting renewed consumer confidence and spending potential.

In Europe, inflation rates have shown upward movement for the first time this year, with both France and Spain reporting increases in consumer prices on June 27, 2025. Meanwhile, the German Federal Budget, approved on June 24, allocates record investments aimed at stimulating economic growth, with plans to elevate defense spending to 3.5% of GDP by 2029. This fiscal commitment underscores Germany's strategic response to changing security dynamics in Europe.

The UK has also experienced positive economic indicators, with the S&P Manufacturing PMI rising to 47.7 and the Services PMI increasing to 51.3 in June, indicating slight recovery in the face of previous economic challenges. However, the Bank of England Governor Andrew Bailey is expected to address concerns regarding a slowing job market in his speech on July 1, 2025.

In Japan, inflation eased slightly to 3.1% in June, down from 3.4% the previous month. This development may influence the Bank of Japan's monetary policy decisions in the coming months as it grapples with balancing inflation control and economic growth.

Looking ahead, key economic indicators set to be released this week include the ISM Manufacturing PMI on July 1, ISM Services PMI on July 3, and the Nonfarm Payrolls report also on July 3. Analysts predict that the labor market remains stable but may exhibit signs of cooling, reflecting broader economic trends.

In China, attention will be focused on the upcoming manufacturing and services PMIs, which will provide further insights into the economic recovery trajectory following the pandemic.

Despite recent volatility and the prevailing narrative of 'Sell America,' U.S. equities have demonstrated a strong recovery over recent months, buoyed by positive developments in tariffs, strong corporate earnings, and resilience in the U.S. economy. Davy Group maintains a tactical underweight stance on U.S. equities but holds a long-term strategic conviction in the asset class, reflecting confidence in the U.S. market's recovery potential.

This analysis is intended for informational purposes only and does not constitute financial advice. Investors are encouraged to consult with their financial advisors to consider their individual circumstances before making investment decisions. The accuracy of forecasts and historical performance as indicators of future results should be approached with caution.