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Daily market snapshot

Published June 13, 2025
 Woman on couch looking at laptop

Friday, 06/13/2025 p.m.

  • Markets react to Israel's strikes against Iran - Escalating tensions in the Middle East drove a risk-off sentiment today, with the S&P 500 down 1.1% and the TSX down a more modest 0.5%. Overnight, Israel targeted Iran's nuclear-program sites and military capabilities, and Iran retaliated with drone and missile strikes, sending oil prices 8% higher*. The heightened geopolitical risks in the region are triggering fears over potential supply disruptions, and because of that, investors appear to be gravitating toward safe-haven assets, like gold, which was up 1.5%*. Government bonds were not part of that flight to safety, as the 10-year yield rose modestly to 3.38%, potentially reflecting inflation concerns*. Elsewhere, European and Asian markets were also broadly lower, but the declines were contained, and major indexes are still up year-to-date*.
     
  • Stocks have a long history of overcoming geopolitical shocks - Israel's series of airstrikes and Iran's retaliation bring geopolitical risks back to the forefront for investors. A widespread conflict could result in potential supply disruptions in the energy markets, though that is not the case thus far. Nonetheless, investors appear to be adding a risk premium to oil prices, which posted their biggest weekly gain since 2022*. The flight-to-safety and equity market pullback shouldn't be dismissed but require perspective.

    Even with today's spike, at around $74, oil is 5% below last year's level and in the middle of its three-year range*. As shown in the table below, past disruptions have resulted in short-term market weakness, but they have not lasted long or triggered a widespread market downturn. Historically, the knee-jerk reaction is for stocks to decline the day of the geopolitical event and for performance to be lackluster over the following week, as investors have a natural aversion to uncertainty. But the impact on returns usually proves temporary, as equities were higher in most cases six months and one year later. The upshot is that history suggests geopolitical risks and the associated shock in confidence tend to be short-lived as markets gravitate toward the more sustainable drivers for returns.


     

  • Volatility may persist in the summer, but fundamentals remain supportive - From geopolitical risks and potential trade developments to evolving fed policy and fiscal debates, the months ahead may test the market's recent momentum. However, we don't think the 20% rally in global equities since the April 8 lows is built on sand. Trade tensions have eased, U.S. policy focus has shifted toward tax cuts, and economic data remain resilient. Also, corporate profits continue to grow at a healthy pace. We think markets are appropriately beginning to look ahead, setting their eyes on the possibility of more stimulative fiscal and monetary policies in 2026. Next week the Fed is expected to keep rates unchanged and remain in wait-and-see mode, supported by the underlying strength in the economy and trade uncertainty. However, policymakers will update their economic and interest-rate projections, which are likely to show a path to gradually cut rates toward neutral over the next 24 months, including one or two rate cuts this year, in our view.

Angelo Kourkafas, CFA
Investment Strategist

*FactSet

Source: FactSet, Edward Jones

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