Weekly Market Commentary

As we move from the third quarter into the fourth, investors have a lot to consider in this crazy market.  US equities finished the week mixed in volatile trade.  A standstill in negotiations between the US and Iran pushed oil prices higher early in the week, but the realization that oil moving through the Strait of Hormuz is now at pre-war levels, along with news that the G7 would release 100 million gallons of oil and diesel from reserves, pushed oil prices lower.  This comes as the Pentagon is considering deploying 10,000 more troops and an additional aircraft carrier to the Gulf.  Elevated oil prices have kept inflation concerns front and center, but a cooler-than-expected PCE report, a weaker-than-anticipated Employment Situation report, and dovish remarks from Fed President Williams and Vice Chair Jefferson moved the probability of a rate hike in October from over 70% to less than 25%.  Interestingly,

Markets finished the week mixed as interest rates increased across the yield curve.  Oil prices swung significantly during the week as reports suggested the US and Iran were close to a deal to reopen the Strait of Hormuz.  This weekend, President Trump rejected the proposed deal, with reports suggesting the US will resume more aggressive military operations after the Midterms.  This is likely to send oil prices higher on Monday and, with it, increase inflation expectations.  President Trump’s meeting with Chinese leader Xi offered little change to the current political stance.  The two countries delayed increasing tariffs until January 2027, and the two leaders are scheduled to meet two more times before year-end.   Additionally, the two leaders appear to be on the same page on AI development and pushed back on slowing it but agreed that safeguards should be put in place.  Debate continues over AI development and its safeguards. 

It was a volatile week on Wall Street as traders assessed monetary policy decisions from several central banks, including the Federal Reserve.  The Fed did, as expected, raise its policy rate by 25 basis points to 3.75%-4.00%, but Fed Chairman Warsh’s very hawkish tone increased the likelihood of three more rate hikes starting later this year and in the first half of 2027.  The Fed Chair offered no forward guidance but did provide the dot plot from the other committee members.  The yield curve flattened on the announcement, with the front end of the curve selling off more than longer-duration Treasuries. Notably, the Bank of England kept its policy rate in place while the Bank of Japan raised its policy rate by 25 basis points.  A more dovish signal from the BOJ’s president sent the Yen lower.  Bottom line: the US economy is strong, employment looks stable, and inflation remains

US equity markets fell in the holiday-shortened week as oil prices surpassed $100 a barrel, raising inflation concerns and pushing interest rates higher.  Additionally, elevated inflation data announced during the week increased the likelihood that the Federal Reserve would raise its policy rate by 25 basis points.  Several Gulf nations announced Friday that they would meet with Iranian officials this weekend to ease tensions, and on Sunday Tehran announced it would decide whether to open part of the Strait of Hormuz, but details of the opening were limited.  This followed Saudi Arabia’s announcement that it had shut down the oil pipeline used to circumvent the Strait. The S&P 500 fell 0.78%, the Dow gave back 1.56%, the NASDAQ declined 0.64%, and the Russell 2000 decreased by 2.39%.  US Treasuries suffered losses across the curve, with the front end of the curve getting hit hardest.  The 2-year yield increased by twenty-six