Weekly Market Commentary

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

Markets finished the week mixed as investors assessed the escalation of tensions between the US and Iran and recalibrated expectations of Federal Reserve monetary policy.  The week started with sharp declines after the US hit targets on an island in the Strait of Hormuz that were ready to launch mines into the strait.  Iran then countered with drone attacks on Jordan and the UAE.  On Saturday, there were reports that the US had hit three Iranian cargo ships after Iran fired ballistic missiles at two US Navy ships.  The news sent oil prices higher, which in turn raised inflation concerns.   Markets settled down mid-week after Dell reported a solid quarter and after dovish comments made by Fed Bank of New York President John Williams.  Markets moved higher on Thursday after Fed Governor Waller said he would be willing to hold rates steady if price pressures continue to ease and noted