One week ago, headlines were dominated by missile strikes and the rising specter of war. Today, investors are celebrating a cease-fire and a record-setting stock market. Such is the pace — and paradox — of modern markets.
At Elevage Partners, we’ve been closely tracking the Middle East conflict and its economic impact over the past few weeks — from the initial Israeli strikes on Iranian nuclear sites to the U.S. bunker-buster escalation known as “Operation Midnight Hammer.” Last week’s cease-fire and market surge were the latest turns in a fast-moving chain of events.
Cease-Fire Brings Relief, But Questions Remain
On June 24, the U.S. administration brokered a cease-fire between Israel and Iran, halting further military escalation — for now. The oil shock that rippled through markets began with Israel’s June 13 attacks and intensified after U.S. airstrikes later in the month. Brent crude briefly spiked into the high-$70s amid fears of a broader regional war. But once peace talks emerged last week, energy prices quickly fell back to pre-conflict levels, trading in the mid-$60s range. If you blinked, you might have missed the sharp escalation, quickly followed by an equally sharp retreat as markets recalibrated to the cease-fire news.
Assuming the truce holds and a more lasting agreement follows, the world may avoid the economic damage of a sustained energy price spike. Persistently high oil prices would have added fuel to the inflation fire and potentially tipped the global economy toward recession.
S&P 500 Surges to New Highs
Even as headlines whiplashed between crisis and calm, equity markets pressed forward. On Friday, the S&P 500 closed at a record high of 6,173, surpassing its previous peak set in February. This marks a full recovery from the near-20% drop earlier in the year, triggered by the Trump administration’s infamous “Liberation Day” declaration of broad tariffs on U.S. trading partners.
The rebound has been fueled by multiple factors:
- Strong corporate earnings.
- Resilient consumer spending.
- The continued dominance of mega-cap tech, especially firms at the forefront of AI.
Case in point: NVIDIA and Microsoft, now the two most valuable companies in the U.S., have each gained 17.5% year-to-date. Their ascent reinforces a critical investment principle: Short-term volatility is inevitable, but staying invested in high-quality businesses over time remains the best course of action.
The Fed’s Delicate Balancing Act
Despite recent strength, not all signs point to smooth sailing. Economic data in housing and manufacturing hint at a potential slowdown. Still, Federal Reserve Chair Jerome Powell struck a cautious tone in last week’s testimony before Congress. The Fed is holding rates steady for now, citing inflation concerns tied to tariff policies.
But pressure is mounting — from both markets and the administration — for a rate cut. If weakness in certain sectors persists, the question becomes whether the Fed will act in time or risk being too late.
Watching Washington (and the Calendar)
With the Fourth of July holiday approaching, all eyes turn to Capitol Hill. Lawmakers are racing to pass what’s been dubbed the “Big Beautiful Bill” — a sweeping fiscal package that would make tax cuts permanent, raise the debt ceiling and significantly increase federal spending. If passed, the legislation would reshape the government’s fiscal trajectory, offering near-term stimulus at the likely cost of pushing the debt problem further down the road and creating greater long-term fiscal strain.
Also due this week: the June jobs report. Economists anticipate a slight uptick in the unemployment rate, from 4.2% to 4.3%. A softening labor market would likely intensify the rate cut debate at the Fed.
Looking Ahead: Calm or Complacency?
Last week, markets breathed a sigh of relief, but investors should remain thoughtful. While geopolitical calm, strong tech earnings and fiscal stimulus have pushed equities higher, uncertainty in interest rates, inflation and global stability still shapes the path forward. At Elevage Partners, we continue to monitor both risks and opportunities with discipline and care.
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