Now, Where Were We – Foy Financial Services, Inc.

“Good investors gather information, put that information into current and historical context, then make sound decisions.”

The sharpest and most severe correction since the COVID correction is now resolved. Mild and moderate corrections are common and historically occur several times a year. We define a mild correction as a market decline of five to ten percent, and a moderate correction as a market decline of ten to fifteen percent. Severe corrections, defined as a decline of fifteen to twenty percent, are actually uncommon, occurring only once every five years. This is based on data for the S&P 500 Index over the past 70 years. The COVID Correction began on February 20, 2020, and was over by June 9, 2020. Our recent correction, the Tariff Correction, began on February 18, 2025, and was wrapped up by June 11, 2025. That’s two severe corrections, each lasting three and a half months, five years apart.

Some might call that a coincidence, but I don’t believe in coincidences, especially in financial markets. It incorporates a vast amount of money, managed by institutions employing the best and brightest, armed with the latest technology, and followed intently by the most skilled investors in history. There is no room for coincidences, or even accidental incidences. Every move is carefully calculated, like a champion chess match, for several moves. There is one more commonality between these two severe corrections. Both were triggered by dramatic steps taken by the federal government. Politics and finance don’t play well together.

Which gets us back to where we are now. Equity markets were in a long-term Bull Market back in 2020 before the COVID Correction, and that Bull Market resumed for another eighteen months. Before the Tariff Correction we were also in a long-term Bull Market, which also appears to have farther to run. A significant difference between these two Bull Markets is the leadership. In 2020, domestic equities were in the lead. This year European equities are in charge.

The MSCI Europe Index is up +2.34% in June and is up +23.39% year-to-date. The MSCI Emerging Markets Index is up +6.48% MTD, and up +15.77% YTD. The MSCI EAFE Index is up +2.16% for the month and up +19.39% YTD. Compare those numbers to the S&P 500 Index, which has rallied +4.54% in June and is up +5.65% YTD. The S&P MidCap 400 Index is up +3.53% MTD and up +0.15% YTD, and the S&P SmallCap 600 Index is up +4.22% MTD and down -4.30% YTD. Tariff negotiations are ongoing, but both internationally and at home, equity markets have moved on.

With the exception of three defensive sectors, the utilities, consumer staples, and real estate sectors, all of the domestic equity sectors we follow are in positive territory for the month of June. The strongest performers are once again focused on the technology sectors, led by the semiconductors sector. The S&P Semiconductors Index is up +15.96% in June, though only up +3.43% YTD. The S&P Telecommunication Index is up +14.22% in June, and up a respectable +9.13% YTD, while the S&P Information Technology Sector is up +8.68% in June and up +6.69% YTD. This underscores the importance of not attempting to ‘change horses in mid-stream’ during a correction.

Bond markets have also enjoyed a good June. The Bloomberg U.S. Corporate High Yield Index has once again been the best performer, up +1.58% MTD and up +4.30% YTD. The Bloomberg U.S. Aggregate Bond Index is up +1.18% MTD and up +3.65% YTD. The Federal Reserve Board recently indicated there may be two interest rate cuts in the second half of 2025. The next cut could possibly be occurring as soon as July. As we stated last month, the Federal Reserve is now in the business of forecasting economic activity, rather than simply reacting to supply and demand, a new and untested role. For both bonds and equities, the second half of 2025 may hold significant potential.

Edward D. Foy, Manager, SELECTOR^® Money Management, Chief Investment Officer, Foy Financial Services, Inc.

Sources: StockCharts, Morningstar, Stock Trader’s Almanac.