Markets Start June Positive Despite US-China Tensions: Stocks to Watch

Despite escalating US-China trade tensions, markets are exhibiting resilience, pricing in a quicker resolution to tariff issues and anticipating two Fed rate cuts in 2025 amid controlled inflation; the core PCE index rose 2.5% annually in April, below March's 2.7%. AppLovin (APP) and Sea Limited (SE) are highlighted as stocks making new 52-week highs, with analysts projecting continued momentum and substantial EPS growth for both companies in 2025, signaling potential market leadership.

Analysis

Financial markets are demonstrating notable resilience, beginning June on a positive trajectory despite escalating US-China trade rhetoric and other geopolitical events. This contrasts with prior months where tariff news induced significant volatility, suggesting market participants are now anticipating a quicker resolution to trade disputes and are less reactive to short-term uncertainties. Concurrently, inflation indicators remain subdued; the core PCE index, the Federal Reserve's preferred gauge, rose 2.5% annually in April, down from 2.7% in March, with a modest 0.1% monthly increase. April's CPI also eased to a 2.3% year-over-year increase, the lowest since February 2021 and below estimates, even with new tariffs in effect. This environment supports the market's expectation of two Fed rate cuts in 2025, with the first potentially in September, despite an ongoing internal Fed debate regarding the transitory nature of any tariff-induced inflation. Specific equities are exhibiting strong performance, with AppLovin (APP) and Sea Limited (SE) reaching new 52-week highs. AppLovin, a mobile app marketing platform, has surpassed earnings estimates for eight consecutive quarters, with an average surprise of 22.9%. Analysts project its momentum to continue, having raised full-year 2025 EPS estimates by 23.02% to $8.39, implying an 85.2% year-over-year growth, and anticipate revenues climbing 24.3% to $5.85 billion. Sea Limited, a Southeast Asian e-commerce and digital services provider, is also poised for significant growth, with analysts raising fiscal 2025 EPS estimates by 1.44% to $4.23, representing a 151.8% increase, and forecasting total revenues to reach $22.37 billion this year, a 32% jump.

Key Decisions for Investors

• Investors should monitor the market's diminishing sensitivity to trade tariff news, as continued resilience could underpin further equity gains, particularly if coupled with anticipated Federal Reserve rate cuts.
• Closely track upcoming inflation data and Federal Reserve communications, as confirmation of controlled inflation and dovish policy shifts are critical for sustaining the current bullish sentiment and supporting rate cut expectations.
• Consider evaluating AppLovin (APP) and Sea Limited (SE) for potential inclusion in growth-oriented portfolios, given their strong earnings track records, positive analyst revisions, substantial projected EPS growth, and technical strength shown by hitting new 52-week highs ahead of broader market indices.
• Recognize that while individual stocks like APP and SE show promising fundamentals, the ongoing debate within the Fed regarding inflation persistence introduces a level of uncertainty to the timing and extent of monetary policy easing.