Investment Update July 1, 2025

Last Week on Wall Street

Geopolitical events continued to dominate last week, with a strong U.S. missile attack on Iranian nuclear facilities, followed by a limited retaliatory response, and ceasefire. Economic data included a downward revision for Q1 U.S. GDP and higher jobless claims, mixed housing data and consumer sentiment, but a sharp gain in durable goods orders.

Stocks saw strong positive returns of a few percent across the globe, with Middle East tensions abating, optimism on trade deals, and economic data otherwise stable. Bonds also saw gains with falling interest rates. Commodities fell back sharply, led by crude oil, with fewer concerns over supply disruptions caused by the Israel-Iran conflict.

U.S. stocks began the week strongly, following Operation Midnight Hammer, during which U.S. air forces struck several Iran nuclear facilities. Despite some consternation early Monday about Iran’s retaliatory missile attacks on U.S. forces in Qatar and Iraq, the limited nature of the Iranian response (with no reported casualties) alluded to an expected intention of saving face but not escalating further. A truce later Monday helped stock sentiment as well, with the President encouraging both Israel and Iran to cease military operations. On the financial side, later in the week, the U.S. Treasury announced a deal with G-7 allies that will exclude U.S. companies from some foreign-imposed taxes (OECD Pillar 2) in exchange for removing the pending Congressional tax bill’s Section 899 (“revenge tax”) provisions, which were intended to penalize foreign investors, businesses, and governments with holdings in the U.S. (It was assumed that seeking a deal was the true intention of inserting that section into the bill in the first place.) Reports that the U.S. and China were completing a new trade deal on Friday also helped investor sentiment. Some members of the Federal Reserve showing an openness to rate cuts was taken positively as well.

Foreign stocks fared similarly to U.S. equities, despite the tailwind of a weaker dollar. Japan provided the strongest returns for the week, while U.K. lagged with gains of only a few percent. As was the case globally, an Israel-Iran ceasefire drove overall sentiment, as well as promises of stronger NATO military spending. Emerging markets were broadly higher as well, with little differentiation by country, other than sharper gains with Taiwan, which is highly correlated to U.S. technology stocks.

Bonds gained along with a decline in interest rates across the U.S. Treasury yield curve, with most key bond groups rising between half of a percent and a full percent. Foreign bonds fared better, with the tailwind of a drop in the U.S. dollar of about a percent.

Commodities fell back broadly last week, with energy suffering the strongest declines, while industrial metals bucked the trend by seeing price gains. Crude oil prices corrected sharply by -12% for the week to $65/barrel. On Monday alone, oil fell by -7% as markets interpreted the measured Iranian military response as a significant de-escalation in tensions, as opposed to a ramp-up that targeted areas like energy infrastructure or shipping in the Strait of Hormuz. The rest of the week saw some vacillation as markets closely monitored events, making intermediate-term trend impacts difficult to discern. Worst-case scenarios (such as a Hormuz closure) remain possible, but appear to now be a smaller probability, with broader fundamentals seemingly a key driver in bringing oil prices back down to the range prior to the June conflict.

(Source LSAConnect)

Fact of the Week

USDA Ground Beef prices hit a record $5.98 per pound in May as US cattle inventories hit their lowest levels since 1951. Ground beef prices are up 16% year over year and 51% since the end of 2020 compared to overall inflation (US CPI) of 23.4%.

(Sources: USDA, Fresno Bee)