Yesterday, June 18: Fed Holds Rates, World Holds its Breath
Fed holds rates steady (again), US makes more Middle East moves, and say goodbye to Medicare and Social Security
June 18 QFR:
The Federal Reserve held the federal funds rate steady at 5.25–5.50% for the fourth consecutive meeting
US State Depart. started evacuating nonessential diplomats and dependents from the embassy in Israel & Trump sends the 6th Fleet to the Persian Gulf.
The "go-broke" dates for Medicare and Social Security trust funds have been moved up.
The Stock Market is Closed June 19 for Juneteenth. Reopens June 20.
Take a deep breath, maybe even go outside for once!
US Market:
U.S. stocks concluded Wednesday with mixed results. The S&P 500 remained virtually flat (-0.03%), while the Dow dipped slightly (0.1%) and the Nasdaq rose (0.1%). The Federal Reserve held the federal funds rate steady at 5.25–5.50% for the fourth consecutive meeting, with Chair Powell projecting only two rate cuts for 2025 (down from three) and raising the Fed’s median inflation forecast to 3.1%. Fed Chair J Powell emphasized uncertainty is stemming from President Trump's tariffs and the Israel-Iran conflict, which is causing oil price volatility and fanning inflation concerns. Treasury yields dipped 6 bps to 4.22% on safe-haven flows
[The market's mixed reaction reflects a tug-of-war between potential interest rate relief and persistent economic uncertainties. The Fed's cautious stance highlights concerns over tariff-induced inflation and geopolitical risks, particularly the Israel-Iran conflict's impact on oil prices. This environment suggests continued market volatility, as investors navigate inflation pressures, monetary policy adjustments, and global stability concerns. Companies like Nucor, benefiting from higher prices, demonstrate sector-specific resilience amid broader uncertainty.]
🧥 - JETS 0.00%↑, UAL 0.00%↑; 🌲 - NUE 0.00%↑, CVX 0.00%↑
Environmental groups and Michigan's attorney general are suing to reverse a federal order keeping Consumers Energy's J.H. Campbell coal-fired power plant open. The U.S. Energy Department intervened, citing potential electricity shortfalls despite Consumers Energy's plan to close it by May 31 for a cleaner energy transition. Challengers argue no emergency exists and the order overrides state and utility decisions.
[This legal challenge highlights a growing tension between federal energy directives prioritizing grid reliability and state/environmental goals for clean energy transition. For energy companies, it creates regulatory uncertainty and potential costs. Investors should weigh the risks of federal intervention in planned clean energy shifts against short-term reliability concerns. This case could set a precedent for future power plant closures nationwide.]
🧥 - CMS 0.00%↑, DTE 0.00%↑; 🌲 - NEE 0.00%↑, ENPH 0.00%↑
The "go-broke" dates for Medicare and Social Security trust funds have been moved up. Medicare's hospital insurance fund is now projected to be depleted by 2033, three years earlier than last year's 2036 estimate. Social Security's combined trust funds are now expected to be unable to pay full benefits by 2034, one year sooner than the 2035 projection from last year. After depletion, Social Security could pay only 81% of benefits, and Medicare would cover 89% of costs. These shifts are attributed to rising healthcare costs and recent Social Security benefit changes.
[The accelerated depletion dates for Medicare and Social Security underscore escalating fiscal challenges facing these critical programs. This signals an urgent need for legislative action, balancing benefit sustainability with political feasibility. For investors, this creates long-term uncertainty around government spending and potential tax policy changes. It could also influence consumer spending patterns as Americans plan for potentially reduced future benefits.]
🧥 - UNH 0.00%↑, XLV 0.00%↑, SPY 0.00%↑; 🌲 - TLT 0.00%↑
US Politics:
The U.S. State Department has started evacuating nonessential diplomats and their families from the embassy in Israel. This decision follows intensified hostilities between Israel and Iran and President Trump's warnings about potential U.S. involvement. The embassy is also organizing departure flights and ships for private American citizens seeking to leave the country.
[This evacuation highlights escalating Middle East geopolitical risks, possibly leading to broader conflict. Such instability typically drives global oil price increases and boosts defense sector stocks due to anticipated military spending. Conversely, the travel and tourism industries usually face negative impacts. Investors often reallocate towards safe-haven assets like gold and U.S. Treasuries during these uncertain periods.]
🧥 - JETS 0.00%↑; 🌲 - LMT 0.00%↑, RTX 0.00%↑, XOM 0.00%↑
President Trump is weighing a potential U.S. strike on Iran to prevent it from acquiring nuclear weapons, despite preferring to avoid conflict. This comes as the U.S. evacuates diplomats from Israel amid escalating regional tensions. European diplomats are also set to hold nuclear talks with Iran on Friday. Trump dismissed Putin's mediation offer, urging him to focus on Ukraine.
[Trump's contemplation of military action against Iran introduces significant global uncertainty, impacting oil markets and defense sectors. While emphasizing nuclear non-proliferation, this stance risks wider regional conflict. The concurrent diplomatic efforts signal international concern. Investors should monitor geopolitical developments closely, as any escalation could trigger market volatility and shifts towards safe-haven assets.]
🧥 - SPY 0.00%↑, JETS 0.00%↑; 🌲 - CVX 0.00%↑, RTX 0.00%↑
The Supreme Court is concluding its term, with 16 cases remaining. These include challenges to Trump's birthright citizenship order and a Louisiana congressional map. The Court recently upheld a Tennessee ban on transgender healthcare for minors. Remaining cases also involve religious rights regarding LGBTQ+ schoolbooks and a Texas law on online pornography age verification.
[The Supreme Court's pending decisions carry immense societal and political weight, especially concerning civil liberties and electoral integrity. Rulings on birthright citizenship, LGBTQ+ rights, and voting maps will significantly shape U.S. law and future political landscapes. For investors, these decisions introduce regulatory and social risks, potentially impacting companies' operational environments and consumer behavior, particularly in tech and media.]
🧥 - META 0.00%↑; 🌲 - FOXA 0.00%↑, GEO 0.00%↑, PLTR 0.00%↑
Global Politics:
Israel launched an unprecedented 60-airstrike barrage on Iranian military infrastructure in Isfahan and Tabriz, escalating the conflict and sending Brent crude up 4% to $76.22; President Trump ordered the U.S. Sixth Fleet into the Persian Gulf, sparking a 1.2% rally in the U.S. Dollar Index (DXY) and a 0.26% drop in the MSCI Asia-Pacific index, as European markets sold off with EUROSTOXX 50 futures down 0.4% on fears of supply chain disruptions and energy price shocks.
[Energy ETFs (XLE, VDE) surged on oil supply fears, while global equity funds (EFA, VEU) slumped as investors rotated into U.S. assets and defense stocks, with safe-haven flows lifting Treasury ETFs and gold miners (GDX) on geopolitical escalation.]
🧥: EFA 0.00%↑, VEU 0.00%↑; 🌲: XLE 0.00%↑, VDE 0.00%↑
Israel's military has warned residents to evacuate the area around Iran's Arak heavy water reactor, signaling a potential strike. The Arak facility is a proliferation concern due to its capacity to produce plutonium, offering Iran another path to nuclear weapons. This warning intensifies regional tensions, with the IAEA urging restraint and having recently inspected the site.
[Israel's explicit warning concerning Iran's Arak reactor marks a critical escalation in the ongoing regional conflict, directly targeting a key component of Iran's potential nuclear weapons pathway. This heightened risk of military action could significantly impact global energy markets, particularly oil prices, due to potential supply disruptions. It also reinforces the urgency for international diplomacy while increasing demand for defense sector assets and safe-haven investments.]
🧥 - JETS 0.00%↑; Tree - RTX 0.00%↑, NOC 0.00%↑, ESLT 0.00%↑
Hurricane Erick, a Category 3 storm with 120 mph winds, is approaching southern Mexico, threatening destructive winds, flash floods, and storm surge. It is expected to make landfall Thursday morning near Acapulco, which is still recovering from Hurricane Otis. Authorities have closed ports and schools, and are preparing shelters. Heavy rains are expected across several Mexican states.
[This hurricane poses a significant threat to Mexico's Pacific coast, particularly Acapulco, potentially causing substantial economic damage to tourism and infrastructure. The rapid intensification of the storm highlights the increasing volatility of weather patterns, which could impact insurance companies and coastal property values. Investors should monitor the storm's progress and potential damage, as it could affect Mexican markets and related industries.]
🧥 - JETS 0.00%↑, BKNG 0.00%↑, EWW 0.00%↑; 🌲 - MELI 0.00%↑
Technology:
Marvell Technology (MRVL) soared 8% to $91.44 after unveiling the NovaAI 8000 series, its most advanced AI data center chip, promising 3x the performance-per-watt of Nvidia’s H200 and immediate design wins with Google Cloud and Oracle; the news sparked a sector-wide rally, with Nvidia (NVDA) up 2.9% and Advanced Micro Devices (AMD) up 2.3%, and pushed the SOXX ETF to a new all-time high.
[Semiconductor ETFs (SMH, SOXX) outperformed on Marvell’s disruptive AI chip launch, while broader tech funds (XLK) gained as hyperscalers and enterprise buyers accelerated AI infrastructure spending, cementing the sector’s leadership and boosting ETF inflows.]
🧥: SOXX 0.00%↑, XLK 0.00%↑; 🌲: XLP 0.00%↑, XLU 0.00%↑
Israeli developer Maor Shlomo's six-month-old, bootstrapped "vibe-coding" startup, Base44, has been acquired by Wix for $80 million in cash. Though not a "solo unicorn," the profitable company had eight employees. Base44 rapidly gained 250,000 users by enabling non-programmers to build applications via text prompts. This acquisition by Wix, a no-code website builder, highlights AI's potential to empower rapid software development and create significant value in a short time.
[The Base44 acquisition demonstrates AI's transformative power, enabling rapid, profitable growth for small teams, validating "solo unicorn" concepts. It signals increasing M&A activity for AI-driven platforms that simplify software development. For Wix, it's a strategic move expanding its no-code offerings into "vibe-coding," diversifying revenue streams. Investors should note this trend of traditional tech companies acquiring niche AI startups for capabilities. It also highlights the shift towards intent-driven software creation and lower barriers to entry in app development.]
🧥 - NOW 0.00%↑, SAP 0.00%↑; 🌲 - WIX 0.00%↑, ADBE 0.00%↑
Midjourney, a popular AI image generation startup, has launched V1, its image-to-video model. Users can upload an image, and V1 creates four five-second videos. This positions Midjourney against rivals like OpenAI's Sora and Google's Veo, though Midjourney aims for "real-time open-world simulations," not just commercial video. The launch follows a lawsuit from Disney and Universal alleging copyright infringement of their characters by Midjourney's AI models. V1 is accessible via Discord and the web, with pricing higher for video generations.
[Midjourney's entry into AI video generation intensifies competition in the generative AI market. Its focus on creative, "otherworldly" outputs could differentiate it, but the high cost per generation and ongoing copyright lawsuits pose significant challenges. For investors, this highlights the immense potential and inherent legal risks in the rapidly evolving AI content creation space. The outcome of copyright disputes will largely shape the industry's future, impacting business models and investment attractiveness for AI startups.]
🧥 - GOOG 0.00%↑, MSFT 0.00%↑, ADBE 0.00%↑; 🌲 - NVDA 0.00%↑
OpenAI is cutting ties with data provider Scale AI, citing a need for more specialized data. This follows Meta's multi-billion dollar investment in Scale AI and hiring its CEO. Google is also reportedly dropping Scale AI. This puts pressure on Scale AI's core business, pushing it to pivot towards custom AI applications for governments and enterprises.
[OpenAI's decision, mirrored by Google, signals a critical shift in the AI data labeling market: neutrality is now paramount. Major AI labs seek specialized, conflict-free partners. This fragmentation will boost smaller, independent data providers. Scale AI's pivot to AI applications indicates a necessary business model evolution, adapting to a rapidly changing competitive landscape.]
🧥 - IBM 0.00%↑; 🌲 - META 0.00%↑, GOOG 0.00%↑, MSFT 0.00%↑
Elon Musk's xAI faces a lawsuit threat from the Southern Environmental Law Center (SELC), on behalf of the NAACP, for allegedly operating 35 natural gas turbines without required permits at its Colossus data center near Memphis. The turbines could emit over 2,000 tons of NOx annually, contributing to severe air pollution in an area already suffering from high asthma rates. SELC claims xAI violated the Clean Air Act, installed the turbines without proper controls, and that the Shelby County Health Department improperly deemed them exempt. Despite xAI's claims of demobilization, aerial photos show 26 turbines remain operational.
[This lawsuit highlights growing environmental scrutiny on energy-intensive AI data centers, particularly those relying on fossil fuels without proper oversight. For xAI and other AI firms, this signals increased regulatory and community pressure, potentially leading to higher compliance costs, operational delays, and reputational damage. Investors should consider the environmental, social, and governance (ESG) risks associated with large-scale AI infrastructure, as permitting and environmental justice issues could significantly impact project viability and long-term profitability in the burgeoning AI sector.]
🧥 - TSLA 0.00%↑, CEG 0.00%↑; 🌲 - NEE 0.00%↑, BEP 0.00%↑
Culture:
President Trump maintains strong support from his base, despite a schism within the MAGA movement over potential U.S. military action against Iran. Trump stated, “My supporters are more in love with me today, and I’m more in love with them, more than they even were at election time where we had a total landslide,” Despite this, “America First” proponents have concerns, including Alex Jones who criticized Trump with a Bush-like composite image. Steve Bannon believes the base will ultimately back Trump, but wants him to justify intervention.
[This division within Trump's base on foreign intervention reveals a core tension between "America First" isolationism and national security conservatism. Such internal strife could complicate presidential decision-making on critical international issues, potentially impacting policy coherence. It also stirs concerns for the second half of the presidency following the midterms if he cannot keep supporters together.]
 | A guest post by
|