This Week in Review | Israel-Iran Conflict, Fed Chair Testimony, Q2 2025 Recap (June 27, 2025)

Transcript

Jessica Breiland:

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, what they may mean for markets, and most importantly, the potential impact for investors. Now let's review what happened this week.

First, the latest in the Israel-Iran conflict.

Last weekend, the US officially intervened in the Israel-Iran conflict when President Trump announced the US targeted three Iranian nuclear facilities. While the direct strikes by the US raised concerns about further escalation, just two days later, on June 23rd, President Trump announced Israel and Iran had agreed to a ceasefire. After some initial back and forth, where both sides accused the other of breaking the deal, the ceasefire appears to be holding.

War is tragic, and it’s unclear how negotiations will progress from here. But it's important for investors to remember that uncertainty and heightened geopolitical risk don't automatically mean trouble for stocks.

Since Israel began airstrikes on Iran on June 13th, stocks' reaction has been fairly muted, with flattish returns and daily moves that have been much milder compared to April's tariff induced wild swings. And what about oil prices? Well, they jumped over 10% two weeks ago but dropped quickly this week to around $67 per barrel yesterday. That's much lower than the $90 per barrel level we saw just a few years ago.

These situations can shift quickly, so we will monitor developments closely for any potential impact on markets. But so far, markets are following a familiar pattern for regional conflicts. Typically, initial jitters ease as investors see the conflict stays contained without major disruptions to global economic activity. Patience and discipline have historically served investors well in times like these.

Next, Powell's congressional testimony.

Federal Reserve Chair Jerome Powell testified before Congress earlier this week. In his testimony, he emphasized his belief that the bank should hold interest rates steady while Fed officials evaluate the impact tariffs could have on prices.

This has sparked some debate. Some feel rate cuts are needed to avoid a recession. Others believe higher rates are necessary to keep tariff induced inflation in check. But we think these fears are probably overblown.

As we've noted for months, tariffs do not automatically cause broad inflation. They may raise the price of specific goods or services, but they don't lead to broad inflation unless there's a big increase in the money supply—which we're not seeing right now. Without a surge in money supply, you don't get the monetary fuel needed for broad tariff-related inflation.

We think many overestimate how much the Fed can influence the economy. And to us, monetary policy doesn't have a predetermined economic effect—for good or ill. For example, fast Fed rate hikes in 2022 and 2023 didn't lead to a US recession. Similarly, we don't think that cutting rates today would automatically stimulate the economy for investors. Instead of spending too much time worrying about what the Fed is going to do, we suggest assessing the Fed's moves as they happen.

Finally, a quarter-end market recap.

Despite this year's negative stock market volatility, US and global stocks are up year to date as the second quarter of the year nears a close. Stocks started the year with gains, but from late February to early April, markets dropped into correction territory. That's a pullback of 10% to 20%, depending on which market index you're observing.

In the second quarter, the market downturn intensified after President Trump unveiled his "Liberation Day" tariffs on April 2nd. Stocks quickly priced in the worst-case scenario. But markets began to rebound as investors factored in developments like tariff pauses, trade talks, resilient consumer spending and business activity, and more. By early June, global stocks had erased the correction's losses, while US stocks re-attained record highs as well this week.

We'd like to remind investors that corrections are nearly impossible to time. Corrections typically end faster than most expect, with a strong, V-shaped bounce and recovery to new highs. Just as we've seen in this second quarter. While uncertainty around tariffs remains and more volatility is always possible, we expect a continued bull market through the rest of 2025.

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, 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!