This Week in Review | Israel and Iran, G7 Summit, Retail Sales (June 20, 2025)

Transcript

Ben Thistlethwaite:

Hello, and welcome to This Week in Review. This weekly segment is designed to highlight a few important developments you may have missed this week, analyze what they mean for markets and most importantly, the potential impact for investors. Now let's review what happened this week.

First, ongoing developments between Israel and Iran.

Stock and oil market volatility returned last week after airstrikes and missile attacks between Israel and Iran took place. This is just the latest chapter in a long running conflict, which has seen both nations suffer destruction and loss of life. War is tragic and has very real human impacts and we empathize with those effected. But like stocks and markets themselves, are focus is on the market related implications. As of now, it's unclear how this situation plays out, and we'll continue to monitor the latest developments. However, we don't think it's likely to escalate into something big enough to cause a global recession or a bear market. Putting this in perspective, Iran and Israel carried out attacks against each other twice last year. Each time, short-term market volatility spiked as investors feared the conflict might expand and pull in the US or other major powers. But tensions quickly dialed down. Oil prices initially spiked but didn't stay high for long, and stocks recovered just about as quickly as well.

Right now, some are worried that Iran might try to shut down the Strait of Hormuz. This is the waterway that sees about one third of all global seaborne oil traffic. Most of it's headed to Asia. If disrupted, it could lead to delays for shippers to find new routes or potentially drive oil market volatility. But the question is whether Iran's naval forces are actually capable of doing this. Plus, cutting off the strait could frustrate Iran's biggest oil customer, China, making it a risky move for Iran. Now we aren't ignoring concerns about a broader war. These situations are fast moving and unpredictable, but markets have a long history of regional conflicts, not automatically being recessionary or bearish, even Middle Eastern wars involving the United States. As we record today, there remain concerns about US direct involvement. President Trump announced a window of up to two weeks allowing for more negotiations to take place.

Next, G7 summit.

This week Canada hosted the 51st annual G7 summit, bringing together officials from seven of the world's largest developed economies, the European Union and guest nations. The leaders discussed topics such as the Russia Ukraine war, the conflict between Israel and Iran, global trade, artificial intelligence and much more. While the US is in the midst of multiple trade talks, many were watching for some big trade announcements coming out of the summit.

On Monday, President Trump and British Prime Minister Keir Starmer finalized parts of their US-Uk trade framework. But here's the catch, we'd caution against reading too much into it. The agreement is light on details. These drawn out follow up trade talks illustrate how uncertainty can continue even after an initial trade announcement. That said, we don't think this uncertainty likely surprises markets or rattles stocks very much because markets have been dealing with this and digesting these trade concerns for months now. Looking ahead, we still believe global economic and trade realities could positively surprise this year, which helps support an ongoing bull market.

And finally, retail sales.

Retail sales were in the spotlight this week, with fresh May data rolling in from the US, UK and China. The standout? China, which posted impressive month-over-month growth, shrugging off concerns over a consumer slowdown tied to tariff uncertainty. Meanwhile, the US and UK reported declines, but we'd encourage investors not to worry. Monthly retail sales dips aren't unusual. We've seen this crop up several times over the past year without sparking a recession. Plus, one month of data never tells the whole story, especially when it comes to things like potential tariff effects.

Some say weak retail sales mean consumers are cutting back, which could hurt GDP. And while consumer spending makes up a large portion of US and UK GDP, it's not usually the main driver of economic shifts. Business investment tends to play that role. Most consumer spending goes to everyday necessities food, housing, utilities, healthcare. These typically remain steady even when the economy wobbles. So here's our take: The often downbeat tone in economic news coverage today suggests that consumer spending has a lower bar to clear to deliver positive surprises ahead.

That's it for this week.

Thanks for tuning in to This Week in Review. If you're looking for more insights, then don't miss our other series, 3 Things You Need to Know This Week. It's released every Monday. You can also visit FisherInvestments.com anytime for our latest thoughts on markets. Thanks again for joining us, and don't forget to hit "like" and "subscribe!"