The June Swoon Interrupts Wall Street's AI-Fueled Party
The June swoon had been telegraphed well in advance. Investor cash levels declined, sentiment hit a three-month high, and a crowded calendar arrived just as the rally looked stretched. All that remained was someone to strike the match.
What triggered the June selloff
A stronger-than-expected May jobs report was the spark. US job growth topped all forecasts in May, and the unemployment rate held steady at 4.3%, offering the clearest sign yet that the labor market was breaking out of a prolonged period of weak hiring.
The S&P 500 fell 2.64% on June 5. The Nasdaq 100 sank ~5%, its worst single-day drop since April 2025. A gauge of chipmakers tumbled 10%.
Ed Yardeni at Yardeni Research described the action as a rotation rather than the start of a correction, though he acknowledged the June swoon may not be over yet.
Not everyone saw the jobs data as a clear negative. "Stagflation is bad for stocks, an inflationary boom is not," said Neil Dutta at Renaissance Macro Research.
The inflation and wealth spiral behind the volatility
The market's inflation anxiety didn't emerge from nowhere. Rising stock prices have generated $6T in US household wealth so far this year, according to Bank of America chief equity strategist Michael Hartnett. That follows $10T in 2025 and $9T in 2024.
Hartnett calls this the "wealth-equity boom loop." Wealthier households spend more, which pushes inflation higher, which pressures bond markets, which threatens stock valuations.
He argues central banks are "behind the curve," and yield curves are bear flattening as markets price in eventual policy corrections.
Bank of America's bull and bear trading indicator had registered its third consecutive week showing a sell signal before the June 5 selloff even occurred.
The fund manager survey Hartnett published in May had already flagged the vulnerability. Cash levels fell from 4.3% to 3.9% in four weeks, the biggest such drop since February 2024. A reading below 4% typically triggers a sell signal.
Bank of America's Hartnett flagged another specific risk: US 30-year yields returning above 5%. The firm identified that threshold as a potential trigger for broader fixed-income stress, with knock-on effects for equities.
What's still ahead that could extend the swoon
The jobs report was only the first catalyst on a crowded event schedule. The consumer price index lands June 10. The European Central Bank and Bank of Japan both hold policy meetings on June 11 and June 16, respectively.
Earnings season adds another layer of uncertainty. Oracle reports the week of June 9, and its options market is pricing in a move of more than 11% in either direction after the announcement, according to McMillan Analysis. Chewy, Adobe, and RH are also on deck, each with a history of large post-earnings moves.
The most consequential date may be June 16-17, when the Federal Open Market Committee meets for the first time under new Chairman Kevin Warsh. "If Chair Warsh pushes for cuts at his first meeting, he will be pushing against the evidence," said Seema Shah at Principal Asset Management.
