What We're Watching in June

Summer is here, and while many take time to unwind and travel, the markets remain in constant motion. For those who closely follow financial news, the headlines often point in conflicting directions. At Carnegie, we cut through the noise by staying grounded in long-term fundamentals, thoughtful portfolio positioning, and informed decision-making. 

Against that backdrop, June presents several key developments worth watching — from softening earnings expectations and ongoing tariff uncertainties to potential tax legislation that could impact household spending. Here’s what our investment team is monitoring this month. 

Earnings Season: From High Hopes to Grounded Reality 

At the start of the year, corporate earnings growth was expected to come in strong. Many market participants anticipated full-year S&P 500 earnings growth in the 13.5% to 15.0% range. However, after a solid, yet not spectacular first quarter, those expectations have moderated. Current full-year growth estimates now sit closer to 9.5%. 

In our view, the market has largely absorbed this downward revision, and while a sharp earnings rally may not be on the horizon, investors appear comfortable with a more modest trajectory. This shift supports our ongoing thesis that today's market is less about chasing aggressive growth and more about steady participation in a resilient economic backdrop. It remains increasingly important to review portfolios for appropriate risk tolerance and avoid unnecessary concentration. See the Chart of the Month below showing the historical concentration of the top 10 names in the S&P 500 index.  

Tariffs and Inflation: What Comes After the 90-Day Window? 

One key uncertainty that continues to influence the market is the future of U.S.–China tariffs. While the initial threat of steep hikes (as high as 145%) has de-escalated, a new baseline of 25–30% tariffs could remain in place. Many Chinese suppliers had previously absorbed a large portion of the higher rates, but during the second term, we may see a partial pass-through to U.S. consumers, potentially raising costs by 10–15%. 

If broadly applied across $3 trillion in imported goods, such pricing pressures could lift headline inflation into the high 3% range over the next year. With the US Trade Court deeming retaliatory tariffs outside of the President's authority, the administration still has some recourse. Section 338 of the 1930s Trade Act allows the President to impose tariffs of up to 50% on countries that discriminate against the US. This may provide relief from 145% level tariffs, but the problem doesn't go away completely. In response, the Fed is likely to remain patient, gauging whether this inflation uptick is transitory or persistent. We believe staying grounded in fundamentals and not reacting to short-term policy noise is the prudent path to take.

The Fed's Balancing Act: Staying Put—for Now 

With inflation data still unfolding, the Federal Reserve continues to hold its current stance. Earlier in the year, many anticipated four rate cuts in 2025. Now, expectations have narrowed to two or three, and some analysts argue even that may be too optimistic. 

The fact of the matter is economic data remains mixed. On one hand, hard data such as wage growth, jobless claims continue to surprise to the upside. While forward-looking "soft" indicators remain more cautious. Until more clarity emerges, the Fed appears content to wait and watch. 

The Big Beautiful Tax Bill 

June often serves as a bridge month in which there is neither a fiscal quarter-end nor an earnings high point, but this year could bring legislative fireworks. The White House has floated a broad tax package that includes several notable provisions that includes increases in the Child Tax Credit, Standard Deduction, SALT Deduction Cap and Estate Tax Exemption.  

While these proposals remain in flux, we believe they could have meaningful impacts on household finances and estate planning. If passed, these updates may present valuable planning opportunities, especially for high-income households and business owners. This includes bringing back accelerated depreciation and raising State and local tax deductions cap from $10k to $40k or higher. 

The United States is primarily a service-based economy with over 75% of economic activity tied to services rather than goods.  The broad dominance of the service economy includes the economic value of the output and the workforce providing services. This service economy includes information technology, professional services, education, finance, government, and healthcare. 

Of these sectors, the information technology sector dominates the services economy, given the growth of its revenues and prospects for future sales expansion. The last technology boom was driven by the Internet and involved laying miles of fiber optics, installing switches and routers, and deploying millions of servers.

Chart of the Month

This chart tracks how much of the S&P 500’s total market value is held by its top 10 companies from 1880 to 2024. For over a century, this concentration hovered between 20% and 28%. But in 2024, it jumps sharply to 38%, a record high. This suggests that a handful of mega-cap companies, likely tech giants, now dominate the market more than ever, increasing potential risks tied to their performance.

Final Thoughts 

June offers important clues for the months ahead. With earnings expectations resetting, inflation potentially ticking higher, and tax legislation in the spotlight, it’s an important time to monitor these developments, but not overreact to them.  

At Carnegie Investment Counsel, we remain committed to helping you interpret the signals and stay focused on your long-term financial goals. Whether navigating policy developments, evaluating investment opportunities, or making sense of shifting economic narratives, we’re here to help you move forward with confidence. 

Disclosures: For general informational purposes only. Opinions referenced are as of the date of the email and may be modified due to changes in the market or economic conditions and may not necessarily come to pass. Forward-looking statements cannot be guaranteed. Past performance is not a guarantee of future results. The information has been obtained from sources we believe to be reliable, but Carnegie has not independently verified the accuracy or authenticity of the information. The discussions, outlook, and viewpoints featured are not intended to be investment advice and do not consider specific investment objectives or risk tolerance you may have. All investments involve risks, including the loss of principal. 

Reference to Indexes: An index is a group of specific securities (such as the S&P 500, Dow Jones Industrial Average, and Nasdaq composite), the performance of which is often used as a benchmark in judging the relative performance of certain asset classes. Indexes are unmanaged portfolios, and investors cannot invest directly in an index. Past performance is neither a guarantee nor indicative of future results. 

Carnegie Investment Counsel (“Carnegie”) is a registered investment adviser under the Investment Advisers Act of 1940. Registration as an investment adviser does not imply a certain level of skill or training. For a more detailed discussion about Carnegie’s investment advisory services and fees, please view our Form ADV and Form CRS by visiting: https://adviserinfo.sec.gov/firm/summary/150488.  You may also visit our website at: https://www.carnegieinvest.com