After a remarkable 36 hours in the Middle East – which ultimately resulted in a tentative cease-fire – stocks are surging while oil is tanking. Gold is also retreating along with the dollar. Treasuries are flat, while Bitcoin is back above $105,000.
Could the latest conflict in the Mideast be over already? That’s what Wall Street is betting on after the US struck key Iranian targets Saturday…Iran only responded with a choreographed missile strike…and Israel and Iran agreed to a cessation of attacks. While both sides accused the other of violating the deal, the overall peace effort appears to be holding - for now.
S&P 500 Index (^SPX)
Crude oil futures were recently down more than $11 a barrel from their Sunday-night highs. Gold is down about $75 an ounce from its recent high, while S&P 500 futures have surged more than 130 points. The S&P 500 Index (^SPX) closed about 1.7% below its all-time high yesterday.
The Federal Reserve’s extended-pause plan is starting to crack. Two Fed policymakers – governor Christopher Waller and vice chair Michelle Bowman – have said they could support a rate cut as soon as July. The remarks come in the wake of the June meeting, where policymakers voted unanimously to keep the federal funds rate unchanged.
President Trump has criticized Fed Chair Jay Powell relentlessly, urging him to cut interest rates. So far, Powell has stayed firm while awaiting more data on the economic growth and inflation fronts. But chances of a cut in July are now up to around 23% -- and September’s implied rate cut odds have climbed to 63%, according to CME FedWatch.
Finally, the outperformance of foreign markets vis-à-vis US ones is getting noticed. Some 44% of money managers are bullish on emerging markets now, according to a quarterly survey from HSBC Holdings Plc. (HSBC). That’s up from 36% in the Q1 survey and the highest in two years. EM stocks and EM currencies have been rising fast. One reason: Investors are seeking out new winners after years of dominance by US markets in general and Mag 7 stocks in particular.
