June 04, 2025
4
min read
💬 Daily Observation
“He who lives by the crystal ball will eat shattered glass” – Ray Dalio
Today’s headlines remind us how rapidly economic conditions can shift and markets rarely follow the script. A much weaker than expected jobs snapshot shook confidence in consensus forecasts, and a surprise jump in steel and aluminum levies caught many off guard. Housing inventory swelled to unprecedented levels when few saw it coming, and European inflation cooled more than analysts anticipated.
Chasing exact predictions feels tempting, but Dalio’s serves as a potent reminder that attempting to predict precise market turning points is often risky. Instead of banking on a single forecast, we are better served by embracing probabilistic thinking, constructing portfolios with diversified exposure, and preparing for a range of outcomes.
☕ So grab your coffee, and let’s dive into Wednesday with today’s fresh edition of Diversification Daily.
🗞️ Today's stories that matter (and why)
1. 🏭 US private payrolls growth slows sharply in May
The ADP National Employment Report, released on June 4, 2025, indicated US private-sector employment rose by just 37,000 in May—well below economists’ forecasts of 110,000 and down from April’s revised gain of 60,000.
Firms cited tariff-induced cost pressures and lingering trade-policy uncertainty as reasons for muted hiring, with the unemployment rate expected to hold near 4.2% into June. Although ADP data often diverge from the Bureau of Labor Statistics, this soft print sets the stage for a sluggish official BLS jobs report later this week.
Why it matters: Fewer than expected job gains imply slower household income growth, which could dampen consumer spending and crimp corporate revenues in cyclical sectors.
Assets in focus: Equities
2. 🏦 Fed’s Goolsbee warns tariffs could trigger rapid inflation
On June 3, Chicago Fed President Austan Goolsbee warned that US import tariffs could quickly increase inflation, as businesses plan to pass higher input costs to consumers within one to two months.
He noted that any resulting economic slowdown would lag in the data, cautioning that if conditions returned to pre-tariff levels, the Fed might be able to lower short-term interest rates later this year—but forecasting remains challenging amid ongoing volatility.
Why it matters: Escalating tariffs squeeze corporate margins and accelerate consumer-price increases, forcing the Fed into a delicate trade-off between curbing inflation and supporting growth.
Assets in focus: Equities
3. 🛠️ Trump’s 50% steel and aluminum tariffs take effect; markets react modestly higher
On June 4, 2025, President Trump doubled tariffs on US steel and aluminum to 50%, yet US futures rose roughly 0.2% as strong tech earnings offset cost-pressure worries. Global sentiment remained cautious, and markets outside the US were mixed amid trade jitters, but US tech resilience helped underpin futures.
Meanwhile, the dollar dipped slightly, gold maintained its ~28% YTD gain, and the US 10-year Treasury yield fell as traders priced slower growth and a likely pause in Fed tightening.
Why it matters: Higher steel and aluminum costs squeeze margins in manufacturing, autos, and construction. Modest equity gains reflect ambivalence: tech optimism versus tariff headwinds.
Lower Treasury yields signal that markets anticipate slower growth and delayed rate hikes: information that directly impacts bond and equity allocations.
Assets in focus: Equities
4. 🏘️ US home sellers are sitting on nearly $700 billion worth of listings, an all-time high
In April 2025, US home listings reached a record $698 billion in total value, up 20.3% year-over-year according to Redfin; this marked the highest dollar amount ever recorded.
Of that, more than $330 billion of listings had been on the market for 60 days or longer, reflecting inventory accumulation as buyer demand weakened.
Why it matters: Record-high listing values signal that sellers are struggling to transact at current prices; rising inventory tends to push sale prices lower, reshaping affordability and giving buyers more leverage.
Investors should watch for downward pressure on home-equity growth and potential rotation into residential REITs or fixed income as housing remains a key wealth component.
Assets in focus: Real Estate
5. 💶 Eurozone inflation cools to 1.9% in May
Eurozone headline CPI decelerated to 1.9% year-over-year in May—down from 2.2% in April and below market expectations of 2.0%—according to Eurostat’s flash estimate.
Core inflation also fell to 2.3% from 2.7%, driven by declines in energy prices and services inflation across major economies such as Germany and France.
Why it matters: Easing inflation reduces pressure on euro-area bond yields and may weaken the euro versus the dollar, benefiting US exporters with European exposure.
Assets in focus: Fixed Income
Are you spread across the right risk factors—or leaning on just a few big bets?
📊 Market Movements Snapshot
Asset Classes:
- 🟢 US Large-Cap Stocks (S&P 500): +1.5 YTD. Standout tech earnings (Nvidia, Broadcom) have underpinned large-cap strength, even as investors remain wary of fresh tariff developments.
- 🔴 US Small-Cap Stocks (Russell 2000) -5.7% YTD. Tariff uncertainty and higher input costs for domestic‐oriented small businesses have weighed on small caps, with market volatility driving a shift into larger, more liquid large-caps.
For the full list, click here
Sectors:
- 🟢 Consumer Staples +6.9% YTD. The sector’s outperformance is attributable to a defensive rotation amid heightened volatility, resilient demand for essentials, and effective cost pass-throughs by major staples companies.
- 🔴 Energy −1.70% YTD. The sector’s underperformance reflects unexpected builds in refined-products inventories, weaker downstream demand, WTI crude in the low $60s compressing margins, ongoing capital flows into renewables, and persistent geopolitical/tariff uncertainty.
For the full list, click here
🤯 Alternative investment highlight: When a GT40 became a $13.2 million trophy 🚗
In March 2025, RM Sotheby’s sold a 1966 Ford GT40 Mk II (chassis P/1032) for $13,205,000—setting a new public‐auction record for any Ford sold globally. P/1032 is one of only eight Mk IIs built for the 1966 24 Hours of Le Mans, finished second at the 1966 12 Hours of Sebring, and spent decades on display at the Indianapolis Motor Speedway Museum before a 2011 concours‐quality restoration.
With its documented racing pedigree and factory‐verified history, nine competitive bids drove the final price nearly 50 percent above the $8–$11 million estimate.
Think of it like discovering a signed first‐edition novel hidden among thrift‐store paperbacks: provenance can transform a 60-year-old racer into a seven-figure “holy grail.” Even if you’ll never own a GT40, P/1032’s sale underlines how scarcity and story drive value in alternatives—from classic cars and art to watches and niche collectibles.
🧠 From the Education Center: Diversification, a Practical Guide
Diversification is powerful—but only when it’s done right. Learn how to spread risk smartly across assets, geographies, and time.
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