This Week
For markets, the big themes this week were the Federal Reserve rate decision, developments in the Iran conflict, and artificial intelligence (AI) model development.
The Fed hiked 25 basis points and sees one more hike this year. The hike to 3.75%-4.00% was widely expected, and the Fed said the move supports “a timelier return” to the Fed’s 2% inflation target, given that “inflation remains elevated” while the economy is growing “at a solid pace.” From here, the median estimate calls for another hike this year, before leaving rates unchanged at 4.00%-4.25% all of next year. Markets, however, see another three hikes before rates stabilize in the second half of 2027 in the 4.50%-4.75% range.
Oil prices hover above $100 per barrel as a Saudi pipeline is set to reopen at half capacity within days and China asks Iran to help “rein in” the Houthis. After closing its East-West pipeline last Friday following attacks, Saudi Arabia expects to reopen it at half capacity within days and at full capacity after six weeks. This pipeline helps bypass the Strait of Hormuz via getting oil to the Red Sea, but this route faces its own issues as Houthis have increasingly taken control of the southern exit from the Red Sea. This week, however, it was reported that China asked Iran to help “rein in” the Houthis, which could help ease oil prices, if successful.
Debate over potentially slowing frontier AI model development to mitigate potential safety risks drove a temporary selloff in chips stocks, though they’ve since recovered.
For the week, 10-year Treasury yields are up a few basis points to 5% – around their highs since 2007 – while the Nasdaq-100® is up 1%.
Note.
For informational purposes only. Not financial advice. Past performance does not guarantee future results.
