A 60-day extension of the ceasefire, a conditional reopening of the Strait of Hormuz and a suspension of the US blockade was announced on Sunday but it seems nothing has been resolved when it comes to Iran’s nuclear program, its frozen assets, war reparations or the lifting of sanctions, which would all be the subject of “further discussions” over the coming months.

Despite lots of missing detail and contradictory interpretations from both sides each desperate to claim victory to their domestic audiences, financial markets breathed a sigh of relief on Monday, sending oil prices spinning to three-month lows and stocks exploding higher to start a holiday-shortened week of central bank interest rate decisions around the world, including from the US Federal Reserve on Wednesday.

Traders decided that the many nagging doubts about the limitations and viability of the memorandum of understanding (MOU) could wait for another day and the US indexes had their best session since April, even though only about half the names in the S&P 500 actually moved higher with tech stocks doing most of the heavy lifting.

Overnight, the Japanese central bank hiked local interest rates to 1.00%, astonishingly its highest level since the original Toy Story came out in 1995, but Wall Street took a breather on Tuesday giving back some of Monday’s blistering rally. Some skepticism started to creep in about the still-unclear finer details of the US/Iran deal that Trump described as “not final”, but attention quickly turned to the FOMC.

Fed Day opened on Wednesday with a consumer read from Retail Sales data which blew through expectations, indicating that Americans are still unable to stop shopping. Under newly-minted Fed chairman Kevin Warsh, the committee held the Fed Funds Rate unchanged as expected but it seems from the quarterly Dot Plot that many members now expect to be raising it before year-end in response to the growing specter of inflation fueled by tariffs and war.

Warsh said he didn’t care about financial market reaction to his comments, which is just as well since Wall Street read the tealeaves and decided to aggressively sell stocks and drive shorter term interest rates higher. All of Monday’s solid gains were erased.

The US/Iran MOU, which became less and less impressive the more we learned about it (see below), was signed on Wednesday evening. Now the real work begins, getting the important stuff agreed upon in the next sixty days and return to a fully functioning and toll-free Strait of Hormuz as soon as possible. There’s plenty of banana skin potential between here and there.

Overnight, the Bank of England left UK interest rates unchanged. After two days of US index declines, dip-buyers stormed back in a big way on Thursday, which was a synthetic Friday with US markets closed the next day.

Oil prices continued to retreat and interest rates eased back from Wednesday’s Fed-induced spike. Big Tech/AI led a strong recovery with the NASDAQ setting a new all-time daily volume record and the US indexes finished the trading week nicely in the green.

Some other things I’m thinking about ..

* Trump sought to break Iran’s regime in weeks. Months later and at a cost of billions of taxpayer dollars and thousands of lives, he seems to have now settled for conditionally reopening the Strait of Hormuz (which was fully open on February 27th). Iranian officials quickly and easily figured out that Trump has no desire to extend the conflict that he started but which is seriously damaging him domestically and they negotiated accordingly.

* The US president has been forced into agreeing to little more than a high value pause which has broken almost all of his supposed red lines and signed in Versailles of all places! It’s not even close to the victory that he will falsely but inevitably claim.

* From Wall Street’s perspective, what matters is that oil prices head back towards where they were before the war and that the inflationary pressures brought about by the conflict ease, because if inflation metrics continue to heat up, fears of interest rate hikes will rise and that’s a potential threat to the three-and-a-half year rally in stocks.

* US oil reserves are at their lowest levels since 1983. This means that the stakes are high when it comes to the upcoming negotiations between the US and Iran because if things unravel (and there were already plenty of signs of strain and backtracking just on day one, not to mention Israel going straight back to bombing Lebanon within hours of the MOU being signed), there is very little breathing room before US consumers and businesses really start to feel the pinch.

If you are not yet a financial planning or investment management client of Anglia Advisors and would like to explore becoming one, please feel free to reach out to arrange a complimentary no-obligation discovery call with me.

ARTICLE OF THE WEEK ..

Whenever Barry Ritholtz tells us what he’s thinking about, we should all listen and learn.

I know I do.

.. AND I QUOTE ..

“Almost uniquely in the field of investing, doing nothing can be incredibly powerful, not lazy or negligent. Far too much value is placed on being active and the industry perpetuates that for its own gain.”

Morgan Housel, author and partner at Collaborative Fund

LAST WEEK BY THE NUMBERS:

Last week’s S&P 500 market color courtesy of finviz.com

* SPY, a US Large Cap ETF, tracks the S&P 500 index, made up of 500 stocks from a universe of the largest US companies. It rose 0.9% last week, is higher by 15.1% over the last three months and is up 9.8% so far this year.

* IWM, a US Small Cap ETF, tracks the Russell 2000 index, made up of the bottom two-thirds in terms of company size of a universe of 3,000 of the largest US stocks. It rose 0.9% last week, is higher by 19.0% over the last three months and is up 22.3% so far this year.

* VXUS, an International Non-US ETF, tracks the MSCI ACWI Ex-US index, made up of over 8,500 of the largest names from a universe of stocks issued by companies from around the world excluding the United States, in both developed and emerging markets. It rose 1.3% last week, is higher by 16.1% over the last three months and is up 15.1% so far this year.

Data shown is total return (including dividends)

INTEREST RATES:

* FED FUNDS RATE * 3.625% (unchanged from a week ago)

* PRIME RATE ** 6.75% (unchanged from a week ago)

* 3 MONTH TREASURY 3.83% (3.78% a week ago)

* 2 YEAR TREASURY 4.19% (4.09% a week ago)

* 5 YEAR TREASURY 4.23% (4.21% a week ago)

* 10 YEAR TREASURY *** 4.46% (4.48% a week ago)

* 20 YEAR TREASURY 4.91% (4.98% a week ago)

* 30 YEAR TREASURY 4.90% (4.97% a week ago)

Data courtesy of the Federal Reserve and the Department of the Treasury as of Friday’s market close.

* Decided upon by the Federal Reserve Open Market Committee at periodic meetings 8x a year. Used as a basis for overnight interbank loans and for determining high yield savings interest rates.

** Wall Street Journal Prime Rate as of Friday’s close. Tending to move in lockstep with the Fed Funds Rate, this measure is used as a basis for determining certain consumer loan interest rates such as credit cards, auto loans, personal loans, home equity loans/lines of credit and securities-based lending.

*** Used as a basis for determining mortgage interest rates.

AVERAGE 30-YEAR FIXED MORTGAGE RATE:

* 6.47%

One week ago: 6.52%, one month ago: 6.48%, one year ago: 6.81%

Data courtesy of the Federal Reserve Bank of St. Louis.

INTEREST RATE EXPECTATIONS:

Where will the Fed Funds interest rate be after the next rate-setting meeting on July 29th?

* 0.25% higher than now .. 38% probability (8% a week ago)

* Unchanged from now .. 62% probability (90% a week ago)

* 0.25% lower than now .. 0% probability (2% a week ago)

With four more rate-setting meetings this year, what is the most commonly-expected number of remaining Fed Funds interest rate changes in 2026?

* Two increases, 38% probability (a week ago: one increase, 42% probability)

Data courtesy of the CME FedWatch Tool and is derived from futures market pricing as of Friday’s market close based on the current Fed Funds interest rate of 3.625%.

PERCENT OF S&P 500 STOCKS ABOVE THEIR OWN 200-DAY MOVING AVERAGE:

* 58%

One week ago: 61%, one month ago: 51%, one year ago: 42%

Data courtesy of barchart.com as of Friday’s market close.

This widely-used technical measure of market breadth is considered to be a very robust indicator of the overall health of the S&P 500 index.

A high percentage (above 70%) generally suggests broad market strength and a bullish trend, while a low percentage (below 30%) may indicate market weakness and a bearish trend.

FEAR & GREED INDEX:

“Be fearful when others are greedy and be greedy when others are fearful.” Warren Buffett.

Data courtesy of CNN Business as of Friday’s market close.

The Fear & Greed Index from CNN Business can be used as an attempt to gauge whether or not stocks are fairly priced and to determine the mood of the market. It is a compilation of seven of the most important indicators that measure different aspects of stock market behavior. They are: market momentum, stock price strength, stock price breadth, put and call option ratio, junk bond demand, market volatility and safe haven demand.

Extreme Fear readings can lead to potential opportunities as investors may have driven prices “too low” from a possibly excessive risk-off negative sentiment.

Extreme Greed readings can be associated with possibly too-frothy prices and a sense of “FOMO” with investors chasing rallies in an excessively risk-on environment . This overcrowded positioning leaves the market potentially vulnerable to a sharp downward reversal at some point.

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