Market Update June 2025: When Should You Get Worried?

Paul Winkler: Welcome. This is “The Investor Coaching Show.” I am Paul Winkler, and he is Evan Barnard, hanging out with me here in the studio today.

I’ve been in a four-hour meeting. Then, I went and cut the grass. I was like, “Come on. Really, Paul? How much do you have to get done in one day?”

Evan Barnard: We were at it pretty early, as well, this morning. I was hauling, I don’t know, about 10 wagon loads of mulch, and we were weeding some stuff in the garden and all. Just when we stopped, it started raining down south.

PW: Right.

EB: And so it was great. It was a great start to the day.

PW: Fun stuff. Yeah.

Is the Market in a Meltdown?

PW: So we have a lot of things to talk about today. Oh my goodness.

EB: Yeah. Nothing going on in the world, is there?

PW: No, no. Not at all. Yeah. Things are mundane.

So yeah. It was funny. I was just talking. Evan and I were just blabbing about some things.

It’s just the investment industry is frustrating, always, to me, and the thing that I get frustrated at, a lot of the reporting on this whole thing that’s been going on has been about markets and what to do, what’s been happening. I’ve been hearing things going, “The market’s in a meltdown,” And I’m like, “1%?”

I was like, “What?” That’s nothing.

EB: Right.

PW: Because it used to be, let’s say you had a 1,000-point move in the Dow. It used to be that 1,000 points was a big deal, 100, 500 points was a huge deal, and I think that people are living in the past, that they’re thinking about 500 points as being a lot, or 1,000 points being a lot, 800 points as being a lot. It’s nothing. It is a blip on the radar screen, number one.

Number two, the other thing is the reporting on what to do and how to manage money. I can’t think of … I don’t know, Evan, you may be able to think of some companies, some investment providers, that don’t engage in active management, stock-picking, market timing, but say that they’re not doing it.

EB: Yeah.

PW: It just seems like that’s the industry standard. Either that, or it’s guaranteed income, those types of things.

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So the guaranteed income people come out of the woodwork when things get a little bit dicey.

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Because, “Oh. You got to protect yourself. You got to make sure you protect yourself.”

EB: The gold people come out.

PW: Yeah. The gold people come out, for sure. But I think guaranteed income, if you had a guaranteed income of $7,000 in the 1970s, you were absolutely rolling. You were doing great, fantastic.

EB: Per year, not per month.

PW: Yeah. Per year. Yeah, per year. Sorry.

Yeah. I should probably be really clear about that.

EB: No. Sorry.

PW: Yeah, but if you have $7,000 now, it’s like, “Can I meet my mortgage payment?” You know?

EB: Right. Yeah.

PW: It’s, “Can I meet my car payment?” That’s really what people are worried about now. You think guaranteed income, you’ve got a problem on your hands. I don’t know of investment firms, especially advertising locally here, that aren’t engaged in annuity sales of some sort for guaranteed income for that.

Then, on the other hand, you get the investment firms coming out and saying, “Hey. Here’s what you need to do based on what’s going on. Here’s what’s happening in markets.”

I’m going to give you an example in just a second here of what that sounds like. Because if you don’t recognize the jargon, and you don’t recognize how they do it, you will be subject to what they’re doing.

The Prudent Investor Rule

PW: I had somebody say this week, they said, “Well, Paul, sometimes, you get a little negative about …” If you knew something was going to hurt somebody, if you were a doctor, and you absolutely knew that cigarettes were just really bad for people, would you get a little negative about cigarettes, or would you get negative about advertising about cigarettes? You’d probably, if you had any heart, you’d get negative about those types of things.

EB: Well, and frankly, in today’s society, let’s use the medical example. Let’s say that there was a proven connection, and we’ll use cigarettes as the example that that’s bad for your health.

PW: Yeah. Something that’s not controversial. Sure.

EB: Yeah, and if the doctor didn’t tell you, and you got sick or maybe contracted lung cancer, you could sue the doctor for not telling you that it was bad for you. I mean, in some respects, we’re protecting ourselves and our clients by saying, “This isn’t good for you.”

PW: In the medical field, yeah, that totally flies, because there are those standards.

EB: Right, right.

PW: I’m telling you, in the investing world, the standards do not apply.

EB: Yeah. There’s no standard of care in market timing. Yeah.

PW: No. There really isn’t. You look at the Prudent Investor Rule, the American Law Institute’s Prudent Investor Rule, I’ve talked about that before. If you’ve never heard me talk about that before, I have a whole thing on it.

Oh. Gosh. I actually have it in front of me, believe it or not. It was a restatement, and I’ll read from it for those of you who have not heard this. Because you need to hear this.

“The restatement is a guide for practitioners of law, trustees, investment advisors, as well as a source of legal authority. It is recognized that trust law, as most often apply to trust practice, is distinct from litigation and concerning trust administration.”

It talks about risk, risk reduction through diversification. It talks about how there are two different types of diversification, diversifying within an asset category, not just owning one large U.S. company or a handful of, let’s say, tech companies. Let’s just use that as an example.

Because I was actually analyzing a portfolio this week, and the lady had many, many different funds in the portfolio, a lot of different funds, and some individual stocks. Well, the interesting thing was that the funds all were holding mainly tech stocks, large-growth companies, and those same growth stocks were held individually, as well.

So you say, “Well, I could diversify amongst all tech stocks.” But the reality of it is that when tech stocks drop 80% like they did 2000 through 2002, you’re not protected. There’s a problem right there.

EB: Yeah.

PW: Then, it goes on to say in the Prudent Investor Rule, “Active strategies entail investigation, and analysis, and expense that tend to increase general transaction costs, including capital gains taxation.” Then, it goes on to say about market efficiency, from an economic perspective, it said, “The evidence shows that the typical investment perspective, the major capital markets of this country are highly efficient in the sense that available information is rapidly digested and reflected in market prices.”

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News comes out, in other words, and it gets reflected in stock prices. 

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That’s the way this stuff works. And information is rapidly digested. It shows up.

Fiduciaries Outguessing the Market

PW: As a result, fiduciaries, fiduciaries, what do you hear advertised? We’re a what? Fiduciary.

That’s what they say. Evan, this would make a great commercial now that I’m thinking about this. This ought to be in a commercial. I ought to just read this.

EB: There you go.

PW: “Fiduciaries are confronted with potent evidence.” Now, notice that they don’t say, “Fiduciaries absolutely cannot engage in this practice.” It doesn’t say that. They’re just confronted with potent evidence.

EB: AKA overwhelming.

PW: Yes. Potent.

EB: Robust.

PW: Yes. Robust, potent evidence that the application of expertise in the investigation and diligence in efforts to beat the market — or get out of the market before it’s going to go down, get in the market before it’s going to go up — ordinarily promises little or no payoff, or even a negative payoff, after taking into account research and transaction costs, after taking into account the expenses that you incur to pay these people to do this thing, that there’s potent evidence that it doesn’t work.

Okay? So you see, I get fired up about this stuff.

“Empirical research supporting the theory of efficient markets reveals that in such markets, skilled professionals have rarely” — but it’s not never, and that’s why they get away with it — “been able to identify underpriced securities, that is, outguess the market with respect to future return with any regularity. In fact, evidence shows that there’s little correlation.”

Oh, but there’s some that did it. Oh, but wait. Wait till the next sentence. There’s some that did it.

There’s some that had better returns than the market. Oh my goodness. “We can’t say that this is a stupid thing to do. There’s some people that did it.”

Oh. Wait. “In fact, evidence shows that there’s little correlation between a fund manager’s earlier successes and their ability to produce above-market returns in subsequent periods.”

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But you can call yourself a fiduciary and engage in this garbage. 

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I guess there’s not many, but there’s this one. I get fired up when even one person gives me any kind of grief about engaging in this type of thing.

EB: Yeah.

PW: They’re saying, “Oh. Paul, you’re getting a little negative there.” I’m trying to protect people.

EB: Right.

PW: I feel like I’ve got to do this. This is important. Don’t gloss over this.

Underreaction from the Market

PW: Okay. So we have a little bit of activity overseas this week.

EB: Teeny bit. Yeah.

PW: Yeah. You think, I mean, Evan?

EB: I would absolutely say we had some activity.

PW: Okay. So what happened?

We hear the newspeople saying, “It’s a meltdown. It’s terrible. The market’s plummeting, blah, blah, blah.”

I’m going, “1%? Really?” But you go on the financial channels, and they did say it’s not really a whole lot going on here. To their credit, they said that, but let’s just check out what they did say and as to why there was such an underreaction.

Speaker 1: We’ve been talking about the possibility of a wholesale attack on Iran’s nuclear enrichment facilities for years, and the fact that the response in the market is about a little over a half a percent of the S&P, I would assume is something of a surprise in terms of how little decline happening.

Speaker 2: Yeah. I mean, I guess it’s a surprise on a headline level.

PW: Now, number one, before I go on, half a percent at that point, and he’s like, “Well, we’ve been expecting this for years.” So is it baked in? Is it that point right there that, in the Prudent Investor Rule, being made, that available information is rapidly digested and reflected in market prices?

EB: Yeah.

PW: That line right there. Was it already baked into the goods that this could happen? I mean, what do you think, Evan?

EB: Yeah. Well, I think that it is viewed by a lot of people as an inevitability, whether it was a missile attack, drone attack, whatever, that there was going to be some kind of hostility. I think the market, it reflects the opinions and behaviors of 8 billion people — not just investors, but consumers, as well, drive market prices.

PW: Exactly. Sure.

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Because your consumer sentiment can drive what the analysts think is going to happen.

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EB: Right. Quit buying gas or whatever the deal is.

PW: Yeah. Sure. Sure.

The Expected Response

EB: Particularly with the last several days, it’s a little bit like the market trying to anticipate or be on the edge of their seat for the next Fed interest rate move. You have this, “Oh. We’re removing our nonessential personnel from embassies.”

I mean, there was some information that gave people more reason to say, “Okay. It might be sooner than later.” Still don’t know when, and to me, and you may have some more bites on this, but to me, let’s just say it was a 1% move based on the attacks.

PW: Sure. Let’s say. Yeah. Okay. Sure.

EB: Makes it easy. And this is the potential start of World War III. All that kind of drama. J.M. Smucker Company — non-tech, Twinkies, Hostess cakes, jelly, peanut butter — missed its earnings report, and it dropped 16.5% in like an hour.

PW: There you go. There you go. There’s perspective for you.

EB: Okay. That caught people completely off guard.

Then, you’re going to have a big move, and again, it’s representative of the Prudent Investor Rule that you were reading.

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News is what drives the market. No one knew what was going to happen, and the second it came out, it was like falling off a cliff. It’s really scary.

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PW: Oh. Yeah, yeah. Exactly. So going on, here was the response.

S2: It’s a surprise on a headline level based on how momentous the chain reaction could be from here. But I think right now, if it’s going to be an isolated response, and there’s all these impediments to it becoming a broader conflict, I’m not surprised that the market, already on firm footing, is going to try to underreact to it, at least initially here.

PW: Yeah, because there is a great possibility that things will work out, and it was expected, the response was expected, what is going to happen eventually is people are going to say, “Hey. Wait a minute. We don’t want to go too far here,” number one. Number two, it’s an area of the world that has always been a powder keg.

EB: Yeah.

PW: I don’t know that there has ever been a period in history where that area has been long predicted that it was going to be that way.

EB: At least since 700 AD. Yeah.

PW: Right. Exactly. Yeah. I mean, it’s just like, yeah. So there’s nothing really new.

But that doesn’t stop the investment firms from coming out and saying, “What do we think is going to happen here?” That’s exactly what Citigroup came out and said. One of the guys from Citigroup actually came out and said, “Oh. Here’s our analysis of it.”

Now, this is just one of many. I mean, I literally could go into dozens, and dozens, and dozens of huge banks and investment firms that would have an opinion, but I’m just choosing one just to give you an idea of what to listen for. This is the type of stuff that you hear.

Overbought Conditions

Sara Eisen: Scott Chronert joins us, Citigroup U.S. equity strategist. He’s here post-nine. He raised his year-end S&P target to 6,300 this week from 5,800.

PW: So this guy comes out, and he raises what he thinks is going to happen in the S&P 500, number one. That’s how she starts the whole segment. This person comes out with some prediction that the market’s going to jump like crazy, and he has the bad fortune of being interviewed on a day after this happens.

SE: Kind of catching up with the market here, I guess, as we continue to make new highs, although a step back today. How do you think that what happened overnight impacts the U.S. equity market, if at all?

Scott Chronert: Yeah. Sarah, so the way we’ve been talking about it is, “Okay. Great. We pushed our target higher, 6,300, roughly 5% upside in the second half of the year.”

Got that. We know that we’re going into this with a close-to-overbought condition on the NASDAQ, at least to a certain degree, the S&P, and volatility.

PW: Now, number one, one of the things he talks about right there, interestingly, is overbought.

EB: Right.

PW: That’s a word that you’ll hear when you’re thinking in terms of someone that is believing in market inefficiency, which is the opposite of what the Prudent Investor Rule is talking about, because they’re making the assumption that it’s mispriced, it’s overpriced. But I think that’s a good point, just because when you say overbought, could he be right?

Yeah. Absolutely could be. Historically, we see run-ups in market segments like we’ve seen in that particular area that he’s talking about. Yet that is where most people have, most American investors have the most amount of money.

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That’s where they have the majority of money. I can’t remember the last time I’ve analyzed a portfolio that I didn’t see that area overheld.

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EB: Right.

PW: So overbought, and it’s overheld. I mean, it almost sounds like I’m agreeing with him. But I’m just saying that they have too much of a concentration in that particular area. But anyway.

Market Volatility

SC: Volatility has come down quite a bit. You see that in the VIX levels, which have begun to come off the bottom recently. So what we had said is this is probably not going to be a year or summer doldrums.

PW: So VIX, he’s just talking about the volatility levels, volatility levels coming up some. Right?

SC: There’s going to be ongoing volatility metrics that come into play, whether it’s policy-related. Now, we have geopolitics coming back into the equation here.

PW: Now, I love that. He’s predicting market volatility.

EB: Yeah.

PW: Evan, oh my goodness. What do you think about that? I was writing down ongoing volatility on the note.

EB: Yeah. We think alike.

PW: It’s just, when have we never had ongoing volatility? Right?

EB: It’s like, “Rain is going to continue to fall from the sky as opposed to raise up from the grass.” Oh. Okay. Got it.

PW: Yeah.

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If it weren’t for volatility, markets would give you the returns of CDs.

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EB: Yeah. Stocks would get you 1%.

PW: Right. Exactly. You would get no higher return than you would with fixed-income investments. So it is just funny that he says that.

EB: There was one piece in an earlier clip that you had played, and it kind of jumped out at me just because of how they used it, is the market does not have a mind. The market doesn’t have thoughts in advance.

PW: Are you talking about the Burton Malkiel thing, that the market doesn’t have a memory?

EB: No. They were basically saying, I think the clip was about how the market is trying to underrespond to this.

PW: Oh. Yeah. Yeah, yeah, yeah. Uh-huh.

EB: Well, the market is just a place where transactions occur. Investors, and institutions, and buyers, they’re the ones driving that behavior. But I think it is oftentimes, we kind of view that the market just acts independently of all the people buying and selling stocks.

PW: Right. Personify the market. Yeah.

EB: Yeah.

PW: Yeah. For sure. Yeah, that’s funny. That is so true.

Buying Volatility-Related Weakness

SC: Our presumption, our presumption when we usually look at these types of activities, is obviously, the path you go is escalation or not. But from there, it’s like the starting point for us is, what’s the impact going to be on global macro conditions? What’s global GDP going to do as a result of this?

PW: Okay. So he’s looking at it and saying, “Hey, what’s going to happen, macro, I mean, big picture, macroeconomics? What’s going to happen geopolitically all across the globe?” I mean, you’re biting off a big piece of pizza right there when you’re trying to figure out how the entire …

EB: Yeah. That’s a lot of variables.

PW: Yeah. That’s a lot of variables to try to figure out how this is all going to play through.

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That’s why this is so frustrating and so hard for any investment manager to do it. Because there’s just too much.

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SC: Okay, and that, we’ll see more on that, but my guess is probably limited. What that, then, does in my framework is come back to probably not a massive influence on underlying S&P fundamentals. Bottom line, initial take here is, be prepared to buy volatility-related weakness.

PW: There you go. So what are we going to do? What do we call that, Evan, being prepared to buy volatility-driven weakness?

EB: I’ll take market timing for 500, Alex.

PW: That’s my son’s name, but wait. No. No. It is exactly.

EB: Or whoever replaced him.

PW: I don’t know. I don’t know. Yeah. I don’t watch it.

EB: Yeah. Oh.

PW: Was it Alex Trebek or something? I don’t know.

EB: Well, Alex Trebek is who used to do it.

PW: Is it? Okay.

EB: I forget who replaced him.

PW: So yeah. I’m glad I even know that much. But anyway, so there it is, right there. There is the state of investment management in the United States.

So she has a really interesting comeback, because he’s trying to downplay oil and all of that. Right? So we can’t let a crisis go to waste on financial channels. Can we?

EB: Wow.

PW: So when we come back, let’s talk a little bit about, or hear what the response was regarding his comments about oil right there. You’re listening to “The Investor Coaching Show.”

Because it’s funny. It’s instructive. We’ll be back right after this.

Protection from Market Downturns

PW: All right. Back here on “The Investor Coaching Show,” Paul Winkler, along with Evan Barnard. So this week, we had the big news, Iran, Israel, back and forth. What’s it going to cause?

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Market went down just a teeny bit. Compared to historic norms, that was nothing. It was a blip on the radar screen. 

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That is not to say it won’t go down further. Or it could bounce back up. You just really don’t know.

But there are all kinds of thoughts about what’s going to happen next, predictions, the big investment firms coming out of the woodwork. That’s what we think people think that they want an investment manager to do.

“Hey. Protect me from market donsurn, downturns, downside.” “Downsurn” is a cross between downside and downturn.

EB: There you go.

PW: Just in case you’re just wondering right there, as my mind is on downsurn.

EB: Put that in the Urban Dictionary next year.

PW: Yeah. I got my “mords wixed,” as I like to say.

Okay. So there was this whole thing about, what’s going to happen? Oil, it’s not a big deal, blah, blah, blah, blah.

Of course, the media, many times, says, “Oh my goodness. We’ve got to make a calamity out of this thing. We got to really stir up some concern about this.”

So the response to the prediction was kind of funny, as well, just in a different way. It was just really the same thing. “Shouldn’t we be concerned? Shouldn’t we be scared?”

SE: Well, seven and a half percent move on oil prices is not nothing. I mean, there are those who worry about sort of 1970s-style stagflation. We’ve got tariffs coming in.

PW: Now, seven and a half percent move, that’s not nothing. Agree, for sure. Yeah. That isn’t nothing.

But when you have moves in oil prices like that, and it can happen pretty quickly, think about it this way: If you have to change suppliers for things, or you have to change what you’re doing, you could have a temporary change in the price of oil, the price of production, of energy, and those types of things. It could be that you have to change suppliers, you have to change where you’re getting it from.

Think about the United States, and we were net exporters, pretty significantly, of oil. Then, we slowed that down. Do you just start to build that back up? That’s not an overnight thing.

EB: Right.

PW: But the idea is, “Oh my goodness. This is terrible. This has turned on a dime, and this is scary. We ought to be worried about this.”

SE: Haven’t seen an inflationary impact there yet. But if we do see a sustained move higher in oil, is that a concern?

SC: At some level, it’s a concern. It’s going to be the sustainability of it.

1970s-Style Stagflation

PW: Oh, well, let me go back. She said something else that I need to address there. I didn’t even think about it until after. I was like, “Oh. Wait, wait, wait, wait, wait.”

What did she say about what this looked like? She talked about ‘70s-style oil.

Now, if you look at what happened in the 1970s, some of you older people that have been around the block a while, you’ve been around here. If you’re under the age of, like, 40, maybe this is something that wouldn’t even register for you, or under 50, I guess.

But you think about, during that period of time, when you heated your house, you drove your car, when you did anything, you ran your manufacturing firm, you ran your company, you ran machinery of any type, what was it driven by? It was all “fossil fuels,” quote-unquote, as they like to call them.

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It was all driven by oil, so that was a huge deal. It was the only game in town when it came to energy sources back at that point in time. 

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Did you see the thing about Toyota, Evan?

EB: I did not.

PW: Oh. Yeah, yeah, yeah, yeah. Yeah. So yeah.

Nick is nodding his head like crazy, yes. I’ve been talking about it here on the show for a little while. I think they’re getting doggone close to a hydrogen-driven vehicle.

EB: Oh. Good.

PW: I think it is really, really getting close, and I saw something out there regarding that, that they think they got this thing down. I mean, stick water in a vehicle, and drive it. That, to me, is, that’s exciting stuff.

EB: The Hindenburg was filled with hydrogen, too, so …

PW: But you know. Okay. Okay. You went there.

All right. So you look at what they did with the tanks on these things. I mean, the tanks are just, it’s not a little dirigible with little thin —

EB: Canvas.

PW: Yeah. Canvas. We’re talking about some seriously thick tanks that this stuff goes in, but anyway.

EB: Well, we have nuclear, too. There was more nuclear after all of that going on.

PW: Well, sure. Yeah, yeah, no question. Absolutely. Dead on right.

So you look at that and go, “Wow. Seventies, we were so dependent upon oil.” And she’s going back to there. I’m thinking, Is this even a valid comparison?

Be Careful What You Wish For

SC: There’s always a “be careful what you wish for” on this. When we look at our S&P earnings profile, for example, started the year looking for 270, we’re now at 261, and we had come down.

Wouldn’t you know, the energy sector has been the biggest drag on S&P earnings versus where we started the year. So what you end up potentially getting here is some relief on the fundamental front for that part of the market.

PW: That’s an interesting thing. You think about it. When you invest, you may have something that you think, Wow. If we have a reduction in cost for energy, then that’s going to be great for everybody, and it is.

But it’s a negative for those companies, and if you own a lot of them, you’ve got to a problem on your hands if you own a lot of those. There are investment firms that go out there and concentrate on this stuff.

There are funds where that’s what they do. There are funds that do nothing but that, and if you made a bet that that was the area to be, then you end up being severely disappointed when that area is hurt more than others.

SC: Inflation readthrough, again, that’s going to have to be a little bit more of a protracted higher oil price setup, and there’s been a lot of discussion about still many sources of supply to be tapped into. So we’re not going to stretch too far in terms of presuming a persistently higher oil price at this point, but certainly, that’s going to be on the radar.

PW: That’s the point right there, is that we have other sources, and there are other things that can be turned to.

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The media, the talking heads, will often go, “Well, what if this happened?” That appeals. People’s anxiety kicks up, and it attracts viewership. 

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It attracts listenership, but it’s detrimental to investors who tune into this stuff hoping that they’re going to get, what? What is it? Why do we tune in?

It’s, if you think about, it’s the desire for a prediction about the future. What’s going to happen? Where’s this going to go? What should I do to protect myself?

Recognizing this in ourselves is the first step, really, to helping protect ourselves from ourselves. Because we tend to be the biggest enemy of good investing. We tend to be our own worst enemy.

Advisory services offered through Paul Winkler, Inc an SEC registered investment advisor. The opinions voiced and information provided in this material are for general informational purposes only and not intended to provide specific advice or recommendations for any individual. To determine what investments are appropriate for you, please consult with a financial advisor. PWI does not provide tax or legal advice. Please consult your tax or legal advisor regarding your particular situation.