Zacks Investment Management

In this week’s issue of Steady Investor, we unpack the latest developments influencing investor sentiment, including:

• Fed holds rates amid uncertainty
• Housing market rebalancing slowly
• Retail sales slowing after surge

The Fed Leaves Rates Unchanged Amid Tensions with the White House – President Trump has made no secret of his growing frustration with the Fed Chairman Jerome Powell, urging him in various statements—many of which are not flattering—to cut rates. The Fed has different plans. At the conclusion of their two-day policy meeting this week, the Federal Reserve left the benchmark fed funds rate unchanged, as expected. Under normal circumstances, recent improvements in inflation data might have set the stage for the Federal Reserve to cut rates, but officials remain in a defensive crouch given the unpredictable effects of new trade restrictions and their impact on inflation expectations. It’s this latter point that appears to be driving Fed thinking today. If consumer and business expectations for inflation become unanchored, the risk of self-fulfilling price increases rises. That would force the Fed to maintain—or even tighten—policy, despite signs of economic softness elsewhere. Market pricing reflects slightly elevated inflation over the next couple of years, but stability beyond that. Officials are debating whether recent price hikes will turn into a recurring pattern or amount to a one-time bump that fades.

The wildcard in this calculus is the ripple effect of tariffs. Unlike the clean one-time shocks economists are used to modeling, the rolling and uncertain nature of recent trade policy changes introduces a layer of psychological unpredictability. That makes it harder for the Fed to determine whether any new inflationary pressure will stick—or spark another round of price hikes. For now, the central bank appears content to stay put, wary of overreacting to temporary volatility but also aware that fragile expectations, once broken, are hard to reset. Whether rate cuts resume later this year may depend less on the next inflation reading, and more on how inflation feels to consumers and businesses over the summer.¹

Unlocking the Hidden Impact of Tariffs on Your Portfolio

Some of the biggest changes in trade policy could come from unexpected legal rulings happening behind the scenes.

Our free June 2025 Zacks Market Strategy Report² explains what these developments mean for tariffs and the market. Find out in this free report—and read about other key market and economic stories including:

• Inside the legal case that is disrupting tariff policy
• Weathering the tariff storm with a globally diversified portfolio
• Making sense of Q2 earnings expectations
• Bottom line for investors

If you have $500,000 or more, fill out the form to receive your free report today!

Download Zacks “June 2025 Market Strategy Report”²

More Homes Are Hitting the Market, But Buyers Aren’t Jumping In – After years of low rates, tight inventory, and bidding wars, housing supply is finally rising in the U.S. market.³

Housing Inventory: Active Listings in U.S.

But instead of reigniting sales, the imbalance between sellers and buyers has only widened. In April, there were nearly half a million more home sellers than buyers—marking the largest such gap in over a decade, according to Redfin. Despite this shift in market dynamics, buyer demand remains subdued. Mortgage rates continue to hover above 6.5%, and home prices—up more than 50% over the last five years—remain a significant hurdle. Existing-home sales declined in April for the second straight month, and nationally, prices softened in nearly one-quarter of major metro areas. Even with inventory at its highest level since 2019, active listings remain below pre-pandemic norms, reflecting years of underbuilding and lingering seller hesitation due to locked-in low mortgage rates. But life events and rising costs are nudging more homeowners to list, and some are increasingly willing to accept lower offers. On the other side of the ledger, the tone has shifted: buyers are entering negotiations with an eye toward discounts, not bidding wars. Taken together, the market appears to be rebalancing—but slowly.

Retail Sales Drop in May and Will be a Key Metric to Watch This Summer – U.S. retail sales fell 0.9% in May, marking the sharpest monthly decline since January and signaling that consumers may be pulling back after a burst of pre-tariff spending earlier this spring. The drop was broad-based, led by a steep decline in auto sales and reduced activity at gas stations, building supply stores, and restaurants. While some categories such as online retail and sporting goods showed modest gains, the overall picture was one of cautious retrenchment.The pullback follows an unusually strong April, when many households appeared to accelerate purchases ahead of anticipated import levies. With that surge now unwinding, May’s figures likely reflect a normalization in activity rather than the start of a deeper consumer retreat. Core retail sales—excluding autos, gas, food services, and building materials—actually rose 0.4%, suggesting that underlying demand remains intact, if uneven.Still, the data serve as a reminder that consumer momentum is not guaranteed. Elevated borrowing costs, high price levels, and lingering economic uncertainty continue to shape household behavior.⁵

Download Our Latest Market Insights – Legal rulings unfolding quietly could trigger major shifts in tariff policy—impacting markets and your portfolio. Don’t miss the crucial details. Download the free June 2025 Zacks Market Strategy Report⁶ now to stay one step ahead and protect your investments. Inside, you’ll find expert insights on key topics, including:

• Inside the legal case that is disrupting tariff policy
• Weathering the tariff storm with a globally diversified portfolio
• Making sense of Q2 earnings expectations
• Bottom line for investors

If you have $500,000 or more to invest and would like to learn more, request this report today!

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