Market Insights Recap — Week of June 23, 2025

Hello, I'm Steve Orr, Chief Investment Officer for Texas Capital’s Private Bank. This week we're going to tackle no change, no change and little change, which all adds up to no change. Markets continued with their first full week of the air war between Israel and Iran last week.

Crude oil prices were the main beneficiary, up 3% last week, a total of 22% this month. Now that's a typical war premium spike. But the muted market response to the U.S. attack speaks how well the parties had telegraphed what was to come. So let's check in three weeks from now.

The Iranian legislature voted to close the Strait of Hormuz. The final decision rests with their Supreme Council. So, if they close off the Strait of Hormuz, cutting off 20% of the world's oil supply, that hits China, because China is the main buyer of their oil and that in turn hits the Iran government. 

Stocks and stock volatility barely budged, focused more on the Fed and D.C. drama. Even though most indices are 1% or more higher this month, the primary trend continues to be stuck in neutral.

In the face of a war, delayed tariff deadlines and a delayed Fed, we're still about 3% from all-time highs. Not bad. Now, events may rattle some markets in the short term, but very rarely affect your long-term strategy. Our indicator dashboard slight movement towards growth over value and international over domestic. But that's just at the margins.

Trader's eyes and ears were on the Fed's Wednesday press release and Chair Powell's press conference. No change in rates for a fourth consecutive meeting. Committee acknowledged tariff trauma but stated, “Economic activity has continued to expand at a solid pace.” Seven of the 19 members don't see a rate cut this year. Eight committee members still think there's going to be two quarter point cuts later this year, unchanged from the first quarter, so no change there. The Fed did cut their GDP forecast and is now projecting 3% inflation by year-end, which is much more in line with our existing base case scenario. They also raised their projected unemployment rate up to 4.5%. So slightly higher rates of inflation and unemployment. The Fed is coming around to the reality of a slowing economy. Hiring in crude prices over the next few months? They're going to be key to Fed's hard data decisioning. They will not change short-term rates until at least September, after Powell presents a policy speech at the annual Jackson Hole Symposium in August.

No change in rates, so cash is going to continue to pay well above inflation, paying north of 4%. Now, we think the economy continues to drift in first gear, waiting on congressional efforts on the tax bill and geopolitical developments. Bonds continue to represent a decent return for long-term investors.

So to wrap it up, muted reaction in global markets to the U.S. bombing in Iran. Well messaged by the administration. Did not catch markets by surprise. Stocks are waiting on D.C. drama and a drop in uncertainty. Not sure when that comes, so sentiment is turning lower. We continue to believe this will be a bumpy, choppy summer for stocks and possibly into the fall. The long-term bull, though, is still in place. Rates are biased to go higher. Tens are building support around that 435 area. Some economic data is coming in good. Some is slightly declining. But on the whole consistent with slow growth and no recession.

So let us know how we can help; 'til next time.