Markets Rally to New Highs as Geopolitical Tensions Ease
Markets closed at all-time highs today, with both the S&P 500 and Nasdaq hitting record levels for the first time since February. This strong finish capped off a surprisingly resilient week, especially given the sharp rise in geopolitical tension over the weekend.
Overnight on Saturday, the U.S. conducted precision strikes on three Iranian nuclear facilities, raising fears of a broader regional conflict. But global markets quickly stabilized after Israel and Iran agreed to a swift ceasefire, easing concerns of prolonged instability and calming investor nerves.
Fed Back in Focus as Investors Eye September Rate Cut
With geopolitical risks fading for now, attention turns back to monetary policy. Investors continue to anticipate two interest rate cuts in 2025, with the first likely arriving in September. However, the Federal Reserve’s next move remains highly dependent on incoming economic data, especially inflation and labor market reports.
Consumer Sentiment Rebounds Sharply
Adding to the bullish momentum, this morning’s release of the June Consumer Sentiment Index showed renewed optimism. The index rose to 60.7, slightly above expectations of 60.5 and sharply higher than May’s reading of 52.2. The increase suggests consumers are feeling more confident about their personal finances and the broader economy heading into the second half of the year.
Inflation Data Mixed but Manageable
Also released today were the May PCE inflation numbers, the Fed’s preferred gauge. Core PCE (which excludes food and energy) rose 2.7% year-over-year, slightly above the forecast of 2.6%. Meanwhile, headline PCE met expectations at 2.3%.
While the slight overshoot in core inflation may keep the Fed cautious in the short term, the overall trend still supports a potential soft landing — with no signs of inflation reaccelerating significantly.