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Caution & Chaos: Traders Brace as the Fed Stalls and War Ignites

Updated: Jul 12

👋 Welcome Back Investors! (June 16 to 20, 2025)

Markets kept us on our toes this week with a fresh mix of headlines, from central bank shakeups to shifting inflation expectations and international trade drama. Whether you're deep in the charts or just catching the highlights, this space is here to help you stay sharp without the noise. As global finance recalibrates and the Fed walks the line between patience and action, investors are weighing every move. Let’s get into the key stories that moved markets this week.



🗽 U.S. Stocks Struggle as Fed Ambiguity and Geopolitical Risks Weigh on Sentiments

Markets were on edge this week as investors digested a growing mix of uncertainty surrounding Federal Reserve policy and rising geopolitical tensions in the Middle East. As reported, the S&P 500 pulled back modestly amid concerns that the Fed may delay further rate cuts due to lingering inflation pressures. While recent CPI data showed signs of cooling, policymakers remain cautious, leaving the market in a holding pattern.

Adding to the pressure, renewed tensions in the Middle East have sparked risk off sentiment, particularly in sectors sensitive to global stability. The combination of unclear monetary direction and geopolitical strain created a challenging backdrop for equities, with investors opting for a more defensive stance as they await clearer guidance.



🏧 Markets Brace for June FOMC: Will the Fed Stick to Its Higher-for-Longer Playbook?

As the June Federal Open Market Committee (FOMC) meeting approaches, investors are dialing in on what could be a pivotal update from the Federal Reserve. While inflation has shown signs of cooling, it hasn't yet fallen far enough for the Fed to confidently commit to rate cuts. The current federal funds target rate sits between 5.25% and 5.50%, its highest range in over two decades, and the Fed is expected to hold it steady at this level once again.


What markets are truly watching, however, is the updated "dot plot," which will provide clues on how many rate cuts, if any, the Fed anticipates for the remainder of 2025. Earlier this year, three rate cuts were projected, but persistent inflation in services and sticky shelter costs may reduce that number to one or two. Chair Jerome Powell has emphasized a cautious, data-dependent approach, reiterating that premature easing could backfire.

For equities and bonds, the stakes are high. A hawkish tone could pressure high-growth sectors and boost the dollar, while dovish language may trigger a relief rally across risk assets. In short, the Fed’s tone next week may set the tempo for markets heading into the second half of the year.



🛢️ Tensions Mount Ahead of Fed Meeting as Middle East Risks Loom Over Markets

Markets traded cautiously throughout the week as investors juggled dual concerns: upcoming Federal Reserve decisions, and intensifying geopolitical risks in the Middle East. With the Fed set to meet soon, market participants showed hesitation, holding off on bold bets as they awaited fresh signals on the future path of interest rates. Inflation appears to be easing toward the Fed’s 2% target, but policymakers remain divided over when, and by how much rate cuts should occur, especially with core inflation proving sticky in certain sectors.

Adding to the market's unease, geopolitical tensions escalated sharply following reports of intensified conflict in the Middle East. In particular, fears over a possible disruption to the Strait of Hormuz, a critical maritime chokepoint through which roughly 20% of the world’s oil transits, rattled energy markets. Citigroup warned that any closure of the strait, whether temporary or prolonged could lead to a surge in crude prices, potentially pushing oil to $90 per barrel. This would not only spark renewed inflationary pressure globally, but also complicate monetary policy decisions in major economies.


With the S&P 500 and Nasdaq showing limited movement, and Treasury yields hovering as traders braced for volatility, the week’s tone remained one of restrained caution. Both monetary and geopolitical developments are poised to define market direction in the days ahead, and investors are closely monitoring updates for signs of escalation or clarity.



📈 Canadian Markets Regain Footing as Focus Shifts to G7 and Fed Developments

After a period of softness, TSX futures rebounded early in the week, signaling a more optimistic tone in Canadian markets as global investors turned their attention to two major macro events: the G7 summit and the upcoming Federal Reserve policy meeting. The bounce came as some geopolitical anxieties began to stabilize and commodity prices; particularly oil and gold, found support amid persistent Middle East tensions and a weaker U.S. dollar. Markets were closely watching the G7 leaders' discussions, especially around trade coordination, energy security, and economic resilience in the face of ongoing geopolitical shocks. Meanwhile, the Fed's interest rate outlook remained a dominant theme globally, with expectations that policymakers would hold rates steady while maintaining a cautious tone. For Canadian equities, especially resource linked sectors, the interplay between commodity price movements and monetary policy remained key. The TSX’s rebound also reflected renewed risk appetite as investors looked past short-term volatility and bet on a soft landing scenario. With the G7 and Fed events now in focus, the market is bracing for potential crosswinds from policy decisions, inflation data, and international diplomacy.



📊 Fixed Income Markets Stay Resilient Amid Fed Uncertainty and Geopolitical Risks

This past week, fixed income markets held firm despite a backdrop of growing geopolitical tension and anticipation ahead of the Federal Reserve’s policy meeting. Latest commentary, investment-grade (IG) corporate bonds outperformed, benefiting from both their relative safety and the market’s appetite for high-quality credit. Spreads narrowed modestly, particularly in long-duration IG, as investors showed continued interest in locking in yields ahead of any rate path revisions. High yield bonds, while still performing, saw more tempered gains as investors remained cautious in the face of Middle East risks and global growth concerns. On the municipal bond side, performance remained steady with modest inflows, although issuance volume remained somewhat restrained heading into the summer.

Nuveen also noted strong performance in emerging markets (EM) debt, supported by easing inflation trends and a softer U.S. dollar. This environment provided favorable technical conditions, though geopolitical instability, particularly in Asia and the Middle East which kept sentiment mixed. The commentary emphasized that Federal Reserve signaling remains the dominant driver for fixed income direction. While rate cuts are still on the table for later in 2025, the Fed is expected to remain cautious until more consistent disinflation data emerges. As a result, duration positioning and credit quality remain central themes for fixed income investors navigating a complex global environment.




👀 Stocks to Watch: What This Week’s Moves Reveal

This week was all about positioning for the unknown. From Fed hesitation to rising Middle East tensions, investors braced for volatility by rotating into defense contractors, energy plays, and safe-haven assets. As policymakers signaled fewer rate cuts and geopolitical risk surged, here are the names that led the narrative from June 16 to 20:

  • Lockheed Martin (LMT) – Gained ground as geopolitical fears escalated following Israel-Iran tensions. With growing demand for defense systems and airstrike-related headlines in focus, military contractors saw renewed investor attention.

  • Occidental Petroleum (OXY) – Climbed alongside crude prices as Middle East risks threatened key oil infrastructure. Citigroup's warning of a potential $90 spike in oil gave a boost to shale producers like Occidental, viewed as prime beneficiaries of higher prices.

  • Barrick Gold (GOLD) – Rallied as investors sought safe-haven exposure amid rising global uncertainty and dollar weakness. The move echoed gold’s fresh highs, driven by inflation risk and hedging behavior.

  • Raytheon Technologies (RTX) – Rose modestly on increased defense spending sentiment. As the conflict narrative intensified, investors rotated toward defense names that could benefit from future military contracts.

  • Enbridge (ENB) – Canadian pipeline operator edged higher as energy infrastructure stocks gained favor. With the Strait of Hormuz in focus, the need for stable North American supply chains lifted interest in midstream players.



🛎️That’s a Wrap!

That’s it for this week’s market recap, appreciate you checking in! From oil price shockwaves and shifting Fed signals to a global flight to safety, this week delivered another dose of high stakes headlines. Defense stocks caught a bid, gold kept climbing, and energy names stayed hot as Middle East tensions dominated the narrative. With the Fed holding rates steady and uncertainty running high, investors continued to reposition around risk, rotation, and resilience. We’ll be back next week with another breakdown of what moved, what mattered, and what’s next as we close out June.


Until then, stay focused and stay curious. Catch you next week 👋



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