US-Mediated Middle East Ceasefire

Market Recap: 23-27 June 2025

Financial Markets

US Stock Market

This week was very positive for the overall equity markets, with the main indices hitting new all-time-highs. The S&P500 and the NASDAQ 100 gained 3.4% and 4.2%, respectively. The main indices continue above the 200-day moving average and may fall or consolidate a little before making more gains. The small cap index (Russel 2000) gained 2.7% and is exactly at the 200-day moving average, a short-term resistance. Trading volumes were slightly above average on the big caps and average on the overall market.

COMMODITIES

Precious metals continued their consolidation this last week. Gold was down by 2.8% and silver was flat. Gold is still close to the previous all-time high. With the cease fire between Israel and Iran, gold may see a decrease in demand. 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 fell dramatically (-12%) with the ceasefire news and closed at ~65$/bbl. The trading range for the near future will likely be 60-67$/bbl.

Bitcoin was up by 6.9% and is very close to the recent highs. 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) fell to ~97. The EUR/USD is around 1.172$, the GBP/USD is at 1.372$, and the USD/JPY is at 144.62 JPY.

US M2 money supply at the date of 26th May 2025 was up by 0.36%, 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 16th June 2025 loosened by 0.6% and showed some signs of deceleration. 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 3.746% for the 2-year and 4.275% 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/or interest rate cuts. However, long-term growth and inflation expectations are about 4.8-4.9%.

The VIX closed the week at ~16.3, a considerable drop due to the positive war news. However, such a low level shows some complacency as the overall market is quite expensive and the risks of overvaluation are naturally high. Risk premiums in the options market are less attractive. 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 at new all-time-highs and the probability of any disappointment pushing the market down are increasing.

The Israel-Iran conflict has de-escalated somewhat due to the ceasefire, but the tariff drama by Donald Trump is not close to the end. Now he says negotiations with Canada are halted!

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 and are certainly generating a lot of volatility. If the equity markets continue rising with enthusiasm, the odds are on the side of an upcoming correction.

Have a nice weekend, and good luck!!!