Market Commentary: Your Weekly Investment Guide (June 4-10, 2025)

1. ECB cut rates, Fed held steady.

2. U.S. jobs solid, services slowed.

3. Trade tensions reshape supply chains.

4. Strong fundamentals beat headlines.

5. Own quality businesses that endure.

A Value Investor's Compass in a Dynamic Week

This past week threw a lot at us. Central banks made big moves, trade policies shifted, and economic signals pointed in different directions. But here's what I've learned after years in this business: successful investing isn't about reacting to every headline. It's about understanding what really affects a company's true worth.

The European Central Bank cut rates for the eighth time this cycle, while the Federal Reserve is standing pat. U.S. jobs remain strong, even as services activity slows down. At the same time, U.S. and China talks show both tension and hope for the future. The key to smart investing? Stay selective, focus on strong businesses, and keep your cool through short-term market swings.

Central Banks Going Their Separate Ways

On June 5, the European Central Bank cut its deposit rate to 2%. That's their eighth cut since last year, and they're doing it because growth is weaker and trade risks are rising. But here's the interesting part: officials hint they might pause soon, depending on what the data shows.

The Federal Reserve is taking a different approach. They're likely to keep rates steady around 4.25% to 4.5% next week. Why? Because U.S. job growth is solid and inflation is still above their target. Meanwhile, Japan and the UK are dealing with their own slowdowns, and China is using targeted support rather than flooding the economy with stimulus.

Why does this matter to you? Different borrowing costs in different regions directly impact companies that operate globally. A company borrowing in Europe gets cheaper rates than one borrowing in the U.S. That's a real advantage worth considering.Subscribe and receive your free Ebook

What the Economic Numbers Tell Us

The economic data paints a mixed picture, and that's exactly when careful analysis pays off. The U.S. services sector contracted for the first time in almost a year, with the ISM services index falling to 49.9 in May. Job growth slowed too. ADP reported just 37,000 jobs added (the lowest since March 2023), and official payrolls rose about 130,000.

Over in the UK, unemployment ticked up to 4.6% and wage growth slowed to about 5.2%. Now, these numbers don't scream crisis. But they do signal slower growth ahead. As value investors, we want to own companies with strong pricing power, healthy profit margins, and products or services people need regardless of economic conditions.

The Trade Story Continues

Trade relations between the U.S. and China dominated headlines again. The U.S. raised some tariffs while lowering others, and closed various exemptions. This shows a more strategic, targeted approach to trade policy. Presidents Trump and Xi had a phone call, with follow-up talks now underway.

The OECD also cut its global growth forecasts, pointing to these trade concerns as a key reason. This is a crucial reminder: check where your companies make and sell their products. The strongest businesses have diverse supply chains and customers spread across multiple countries. They're not dependent on any single market.

Learning from This Week's Earnings

Let me share some real examples from this week's earnings reports. They perfectly illustrate what to look for:

GameStop posted a small profit, but dig deeper and you'll see it came from cost cuts, not actual business growth. They also bought Bitcoin, which raises eyebrows about their strategy.

J.M. Smucker reported a loss under standard accounting rules but beat expectations on adjusted earnings. More importantly, they generated solid free cash flow. That's the kind of company that can weather storms.

Academy Sports saw same-store sales decline, but their online business grew and they're reducing dependence on China. That's strategic thinking in action.

The lesson? Always read beyond the headlines. The best companies have clear strategies, generate reliable cash flow, and make smart decisions about capital allocation.

Where to Position Your Portfolio

So where does all this leave us as investors? Central banks are moving in different directions. Economic indicators send mixed signals. Trade policies could shift again tomorrow.

This is exactly when long-term value investing shines. Companies with pricing power, efficient operations, and smart capital allocation will do well regardless of the environment. Look for businesses making asset-light deals (like Hyatt has done), using AI to boost efficiency, or operating in steady sectors like consumer staples or defense.

Remember, we're not trying to predict every market twist and turn. We're looking to own pieces of businesses that can thrive in various conditions.

The Bottom Line

This week reinforced a timeless truth: real investment value comes from owning quality businesses, not from following every market headline. Stay patient. Stay disciplined. Focus on companies with sustainable competitive advantages.

If you found this analysis helpful, please share it with someone who might benefit. I'd love to hear your thoughts or answer any questions. Just drop me an email anytime.

Remember, successful investing is a marathon, not a sprint. Let's run it together.

Happy investing!
Josh

The information is provided for educational purposes only and does not constitute financial advice or recommendation and should not be considered as such. Do your own research.