Geopolitical Stress: US Strikes Iranian Nuclear Sites

Market Recap: 16-20 June 2025

Financial Markets

US Stock Market

This week was essentially neutral for the overall equity markets with the S&P500 losing 0.15% and the NASDAQ 100 flat. The main indices are now above the 200-day moving average and we approach the all-time-highs. The small cap index (Russel 2000) gained 0.7% and is hovering below the 200-day moving average, a short-term resistance. Trading volumes were average.

COMMODITIES

Precious metals have been consolidating this last week. Gold and silver were down by 1.8% and 0.8%, respectively. Gold is close to the previous all-time high! With the current geopolitical strains, gold might shoot up next week! However, if gold corrects, the first target should be around 3000$/oz. Silver will likely stay above 35$/oz, which should act as support for the time being.

WTI crude oil fluctuated during the week and closed at ~74$/bbl on supply worries due to the Iran conflict. It might increase even further in the next few days due to the escalation of the war. The trading range for the near future will likely be 67-75$/bbl, but if oil shoots up next week, it could go to the 86-88$ area rather quickly.

Bitcoin corrected 2.7% this week and is around 102k$. For the next weeks, the key resistance and support levels on Bitcoin are 112k$ and 92k$, respectively.

US DOLLAR, MONEY SUPPLY

The relative strength of the US dollar (DXY) rose to ~99. The EUR/USD is around 1.152$, the GBP/USD is at 1.345$, and the USD/JPY is at 146.10 JPY.

US M2 money supply at the date of 28th April 2025 was up by 0.72%, showing a slow increase over the previous month – credit institutions didn’t stop lending so far. If the money supply was going down, it would be another warning sign for the economy and equities.

The national financial conditions index (NFCI) released on 9th June 2025 loosened by 2.7%. Note that this indicator is delayed by two weeks. Positive numbers in the NFCI mean tighter financial conditions, while negative numbers indicate looser financial conditions.

BONDS AND OPTIONS

US bond yields fell slightly this week. Yields now sit at 3.906% for the 2-year and 4.377% for the 10-year. As you can see, the yield curve has uninverted since a year ago, and lower yields are expected in the next few years, likely as a consequence of a recession and interest rate cuts. However, long-term growth and inflation expectations are about 4.9%.

The VIX closed the week at ~20.6, essentially unchanged relative to the previous period. Risk premiums in the options market are moderate. Similarly to previous weeks, it is our opinion that the overall risk in the stock market (high valuations in the big caps) and uncertainty about the US and worldwide economy is considerable. Thus, any equity purchases must be strategic and opportunistic!

Comment Section

The US equity markets are holding for the moment and financial conditions are not tight.

The Israel-Iran conflict has escalated as the US struck nuclear enrichment facilities over the weekend, as we write this weekly report.

The Federal Reserve left the federal funds rate unchanged at 4.25%–4.50% for a fourth consecutive meeting in June 2025, in line with expectations, as policymakers take a cautious stance to fully evaluate the economic impact of President Trump’s policies, particularly those related to tariffs, immigration, and taxation. The Fed continues to project two rate cuts later this year, though it anticipates only one quarter-percentage-point in 2026 and 2027. In its updated projections, the Fed downgraded its GDP growth forecast for 2025 to 1.4%, while the unemployment rate is now expected at 4.5% in both 2025 and 2026. We believe these projections are not very optimistic for the economy and actually mean the FED will have to lower rates faster and deeper than they are communicating.

As we have been saying, some damage to the economic activity was done in April-May 2025 and that will be reflected in the next earnings season (Q3 2025), but by the end of the year we might look back and conclude that it was not very serious. The current middle-east wars may have extra effects that we cannot forecast. At the moment we don’t have a particularly positive or negative bias for the economy and equity markets.

Have a nice weekend, and good luck!!!