Economic & Policy Highlights

Interest Rates & Fed Outlook

– Fed held rates steady at 4.25–4.50% on June 18
– Markets now see only 1–2 rate cuts by year-end
– Fed Chair Powell emphasized caution amid trade and geopolitical risks

Trade & Tariffs

– Elevated tariffs remain in place, and implementation delays continue
– U.S.-Bound Japanese auto exports dropped over 11% in May

Employment & Growth

– May non-farm payrolls showed slowed hiring
– Unemployment: ~4.2%, projected 4.3–4.7% by year-end
– Retail sales down –0.9% in May
– GDP outlook revised down to ~1.3% for 2025

Middle East Conflict & Energy

– June 14–16 Israeli strikes on Iran spiked oil prices ~7–11%
– WTI ~ $77.6/barrel; Brent near $75
– Oil tanker rates rose; supply chain concerns elevated
– Broader inflation risk rising globally
– Iran is facing an economic crisis: 40%+ inflation, falling exports

Other Global Developments

– UK inflation at 3.4% in May; BoE likely to hold rates
– Australia: oil +8%, consumer costs rising; RBA cautious on cuts

Market Commentary

As we entered 2025, we adopted a cautious approach in our portfolios by increasing our money market and international assets while reducing our exposure to cyclical sectors and maintaining our investment in Gold. The market has been overvalued, trading at historically high Price to Earnings Ratios.  These strategic changes have proven advantageous in the first few months of the year.

Uncertainty regarding the effect of Tariffs, high P/E valuations, stubborn inflation, and elevated interest rates contributed to the market decline of 18.69% from its peak.

Following the decline, the market rebounded and is now positive for the year. However, our valuations remain unchanged; the market is still overvalued, with the current P/E for the S&P 500 standing at 27.99.  The economy is weakening, with a decline in GDP alongside rising jobless claims and unemployment.

As previously mentioned, we have increased our international exposure and continue to identify notable pockets of value, particularly in Brazil (P/E 7.46), South Korea (P/E 10.98), Ireland (P/E13.34), and Germany (P/E15.19).

Gold has been a leading performer for the past 20 years, averaging an annual return of 11.4%. Given the rising national debt in the U.S., increasing global tensions, ongoing attacks, and a weakening dollar, we will maintain our positioning in this precious metal.

OmniStar’s leading indicators are signalling a recession, which could materialize as early as the fourth quarter of this year or early next year. We will continue to manage our portfolios with a focus on capital preservation and moderate growth.

While it is possible that we are premature in our predictions or that the U.S. will avoid a recession, we prefer to forgo a few points on the upside to minimize our downside exposure. As my grandfather used to say, “The only way to get rich quick is to do it slowly.” Building wealth is a process, and successfully navigating volatile markets requires decisive action.  Thank you for placing your trust in our hands.

Your OmniStar Investment Team