Stock Market Outlook: June 2025

Tariff news: What does TACO stand for?

• Ever wonder how the stock market is able to shrug off tariff news? The phrase “Trump always chickens out,” or “TACO” for short, explains Wall Street’s optimism.The “TACO trade” refers to a strategy in which investors buy the dip in the stock market when Trump announces new or higher tariffs, then sell stocks for a profit when he announces delays or reversals to those tariffs. But a reporter said the phrase to Trump’s face at a briefing on May 28, raising fears that he may not chicken out again in the future.

• For now, several new tariffs are on pause. At the briefing in which Trump learned about the TACO meme, he announced a 90-day pause for new 145% tariffs on China. He also pushed back the deadline for new 50% tariffs on the European Union to July 9.

• Federal courts are still determining the legality of Trump’s new tariffs. On May 28, the U.S. Court of International Trade (CIT) moved to block the Trump administration from using emergency powers to implement a 10% universal tariff and reciprocal tariffs on select countries. But on May 29, a federal appeals court delayed CIT’s block, allowing the tariffs to stay in place while the case plays out. The CIT has until Thursday to file a response, and the Trump administration has until June 9.

Term of the month: U.S. credit rating downgrade

On May 16, Moody’s Ratings, one of the “Big Three” credit rating agencies along with S&P Global Ratings and Fitch Group, downgraded the U.S. government’s credit rating. It dropped the U.S. government from its highest rating, Aaa, to its second-highest rating, Aa1.

Moody’s was the last of the Big Three agencies to downgrade the U.S. government’s debt. S&P was the first, having downgraded the U.S. from its highest rating to its second-highest rating during 2011 negotiations about raising the debt ceiling. Fitch did the same in 2023 amid another debt ceiling crisis.

As a result, the U.S. government no longer holds a perfect credit rating from any of the major credit rating agencies. Here’s why, and what it means for the U.S. economy and for investors.

Why did Moody’s downgrade the U.S. government’s credit rating in May?

In its rating downgrade announcement, Moody’s noted that the U.S. government has higher levels of debt, and higher interest expense, than other governments that have a perfect credit rating. It also expressed a lack of confidence that the U.S. will get its national debt under control any time soon.

“We do not believe that material multi-year reductions in mandatory spending and deficits will result from current fiscal proposals under consideration,” the agency wrote.

The line about “current fiscal proposals under consideration” is likely a reference to the One Big Beautiful Bill Act — a GOP-backed spending bill which passed the House of Representatives on May 22. According to the Congressional Budget Office, the bill would add more than $3 trillion to the national debt over the next decade, mostly via tax cuts.

The Moody’s downgrade follows the precedent set by S&P and Fitch, which both knocked the U.S. down one rating due to concerns about its rising national debt.

What are the implications of a credit rating downgrade?

The market for Treasury bonds felt the most immediate impact of the downgrade. On Wednesday, May 21, the U.S. government held an auction for $16 billion worth of new 20-year Treasury bonds — the first auction for that type of bond since the Moody’s downgrade.

Investors demanded much higher yields than expected at that auction, causing the 20-year Treasury yield to briefly rise above the psychologically-significant 5% level. Other types of Treasury securities, such as the 30-year bond and the 1-year bill, also saw their yields creep up after the auction.

Treasury yields rise and fall over time, but the yield on a specific Treasury security is fixed over the life of that security, assuming the buyer doesn’t resell it. As a result, when Treasury yields go up, even temporarily, that increases the U.S. government’s interest expense — the cost of making payments on the national debt.

Interest expense accounted for 14% of total U.S. government expenditures in 2024. It’s the second-largest line item in the federal budget after Social Security, and is higher than government spending on Medicare or national defense.

If that number continues to increase due to rising debt levels, rising yields or credit downgrades, it could severely constrain the government’s ability to spend money (for example, on new social programs) or float new tax cuts in the future.

What does that mean for investors?

It’s important not to catastrophize what the Moody’s downgrade means for your finances. Moody’s noted in its downgrade announcement that the U.S. government is still in a very strong financial position.

“The US economy is unique among the sovereigns we rate. It combines very large scale, high average incomes, strong growth potential and a track-record of innovation that supports productivity and GDP growth,” the announcement stated. “While GDP growth is likely to slow in the short term as the economy adjusts to higher tariffs, we do not expect that the US' long-term growth will be significantly affected.”

“In addition, the US dollar's status as the world's dominant reserve currency provides significant credit support to the sovereign. The credit benefits of the dollar are wide-ranging and provide the extraordinary funding capacity that helps the government finance large annual fiscal deficits and refinance its large debt burden at moderate and relatively predictable costs,” Moody’s wrote.

With that in mind, there’s a glass-half-full perspective one could take on the recent downgrade: Treasury bonds are still very safe investments, and they now pay a little more interest than they used to.

» MORE: Best online brokers for bonds

Dates that could move markets this month

Economic events

• Friday, Jun. 6: Bureau of Labor Statistics (BLS) monthly employment report. A report showing hiring levels and various measures of the unemployment rate.

• Wednesday, Jun. 11: BLS consumer price index (CPI) report. A key inflation gauge. The employment and CPI reports could give investors hints about what the Federal Reserve will do with interest rates in future meetings; unexpectedly high unemployment or low inflation could indicate that rate cuts are on the way.

• Wednesday, Jun. 18: Federal Reserve interest rate decision. The Fed will conclude its meeting and announce the new level of the federal funds rate. It is expected to keep the rate unchanged, but it may announce a 0.25% cut. The Fed will also release a summary of economic projections showing its estimates of future interest rates.

• Friday, Jun. 27: Michigan consumer survey data for June. The University of Michigan will release its preliminary data for this month’s survey on Jun. 13, and its final data on Jun. 27. The survey has become a closely watched indicator of ordinary Americans’ perceptions of the economy.

Earnings

Below is a table of blue-chip stocks that are reporting earnings in June, with the expected dates and average analyst estimates for their upcoming earnings reports.

We've filtered the list for companies with a market capitalization of at least $100 billion. These are high-volume stocks whose earnings reports are often major trading events for options traders and day traders.

No data above? Log in or register for a NerdWallet account to see the full earnings calendar.

Source: Nasdaq.com. Data is current as of Jun. 2, 2025, and intended for informational purposes only.

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