Geopolitics & The Fed Push Equities Lower

A confusing message from the Fed and geopolitical concerns caused equities to slump last week.

Fed Chairman Powell stated last week, "We expect a meaningful amount of inflation in the coming months," as the Fed left rates unchanged. Yet, inflation has been paltry thus far since "Liberation Day" in April. It would appear the Fed has become less data-driven and more forward looking. There's also some division among FOMC members as 8 members see two rate cuts this year, while 7 members see no rate cuts in 2025. If stagflation (higher unemployment, rising inflation, and declining growth) was a reality, it's certain rate cuts would be in the cards. The mixed messaging from the Fed is adding to uncertainty in markets.

As rising conflict in the Middle East began to spring its ugly head over a week ago, investors have been more defensive.

Indeed, the U.S. sent tactical bombers into Iran over the weekend to disrupt uranium enrichment. The fallout from the bombing is still in question, but what is not in question is the fact that we've been here before. Markets have experienced geopolitical shocks which have largely proven to be long-term buying opportunities. Meanwhile, expectations for higher inflation and rising unemployment are not matching actual data points. Items expected to be affected by tariffs - autos, apparel, etc. - have seen price declines. The lack of inflation from tariffs has clearly confounded the Fed. Investors would be wise to follow a sound investment strategy and not be swayed by solitary headlines.

---

Disclosures

The information contained herein is for informational purposes only and is developed from sources believed to be providing accurate information. The opinions expressed are those of the author, are for general information, and should not be considered a solicitation for the purchase or sale of any security. The decision to review or consider the purchase or sell of any security should not be undertaken without consideration of your personal financial information, investment objectives and risk tolerance with your financial professional.

Forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.

Any market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.

Past Performance does not guarantee future results.