The economy takes a back seat

If it hadn’t been for Friday… if it hadn’t been for Israel and Iran… In short, if only – everything would have turned out just fine. The week began with a modest dose of optimism, fuelled by the U.S.-China trade talks in London. While no breakthrough was achieved, the negotiations injected a bit of confidence. As a result, the week got off to a reasonably upbeat start.

The main benchmark of the U.S. market – the S&P 500 – had finished the previous week at the 6000-point level. At the start of the new week, it tried to build on that success and by midweek had climbed past 6050 points, coming within arm’s reach of its all-time high from February.

Further optimism came from the quarterly results of tech giant Oracle Corp. (ORCL), released after the close on Wednesday. The report was genuinely impressive. Oracle’s shares surged, lifting the entire tech sector with them. By the end of the week, Oracle was the top performer in the S&P 500, gaining more than 23%.

Had the week ended on Thursday, all indexes would have closed in positive territory. But the outbreak of hostilities in the Middle East changed everything. On Friday, there was no longer any talk of growth. The only sector to truly benefit was energy – and for good reason: oil prices shot up, and energy stocks quickly followed suit.

By the end of the week, energy shares had risen by an average of 5.67%, with nearly all of that gain occurring on Friday. The commodities segment also offered slight support, closing the week with a modest increase of 0.21%. However, most companies quickly gave up their earlier gains and ended the week in the red. The financial sector was hit hardest, with a weekly loss of 2.28%.

This inevitably weighed on all major U.S. indexes. Friday’s sell-off erased the week’s gains, leaving the indexes slightly down – from a 0.39% drop in the tech-focused NASDAQ Composite to a 1.32% fall in the Dow Jones Industrial Average (DJIA-30).

The Dow fared the worst, largely due to a steep decline in shares of Sherwin-Williams Co. (SHW), the week’s biggest loser within the index. The sell-off was triggered by a negative outlook from Citigroup (C). “Housing market activity remains subdued,” warned Citi analyst Patrick Cunningham in a note published on StreetInsider.com. He pointed out that interest rates remain elevated and the chances of a near-term cut from the Fed look very slim.

Given the current economic environment, Citi wrote that it had “low confidence in a meaningful recovery of the U.S. housing market in the second half of 2025”, and saw “an unfavourable risk-reward ratio” in buying Sherwin-Williams shares at current prices. Clearly, investors took note – the stock tumbled nearly 7% (-6.99%).

As for the ITS family of indexes, they had been moving broadly in sync and steadily rising – right up until Friday. The ITS World Index (ITSW) set new all-time highs several times during the week, but ultimately could not withstand the Friday sell-off by investors across the U.S., Europe and Asia, closing the week down 0.87%.

The ITS Shariah Index (ITSS), however, stood firm like a tin soldier. It not only avoided losses but even edged higher, gaining 1.40% for the week. Its resilience was largely due to strong performance from oil and pharmaceutical stocks, which were mostly unaffected by Friday’s global sell-off. So the credit goes to oil majors Chevron (CVX) and Exxon Mobil (XOM), along with pharmaceutical heavyweights Eli Lilly & Co. (LLY), Johnson & Johnson (JNJ) and Merck & Co. (MRK).

In general, it’s safe to say that the economy has taken a back seat, with market attention now focused on the geopolitical tensions in the Middle East. In such conditions, forecasting becomes extremely difficult. In the days ahead, investors will likely look to reduce exposure and protect their portfolios. A continuation of Friday’s sell-off is therefore a very real possibility.

 

 

Market outlook for 16 June 2025

Unfortunately, stock market updates are increasingly starting to resemble war reports. This week has again been saturated with news of destroyed residential buildings and, in more formal terms, damaged infrastructure – rather than economic updates or changes in stock prices.

So there’s little reason to expect any major breakthroughs in the coming days, although it would be wrong to call this a quiet week. The key event ahead is the upcoming meeting of the U.S. Federal Reserve’s Federal Open Market Committee (FOMC), where a decision will be made on whether to keep or adjust interest rates. As usual, the result will be announced on Wednesday at 23:00 Astana time. Currently, the vast majority of market participants (CME futures suggest a 97% probability) expect the rate to remain unchanged in the 4.25-4.50% range. Since markets are well prepared for this outcome, it’s unlikely to trigger any significant volatility.

What might cause a stronger reaction, however, are the U.S. retail sales figures for May, due out on Tuesday. These are traditionally seen as a useful complement to inflation statistics and should ideally confirm that consumers are still willing to spend and remain confident about the future.

Beyond that, there are few notable economic events this week. It’s worth noting that Thursday is a public holiday in the U.S., as the country celebrates Youth Day.

There’s not much happening on the corporate front either. The earnings season is over, and the next one won’t begin for nearly a month. Still, a few notable reports are expected later in the week, including results from food retailer Kroger Co. (KR) and restaurant group Darden Restaurants, Inc. (DRI), which could stir market interest.

As for the current mood after the weekend, the global investment community appears to have calmed somewhat, with today’s trading showing a positive tone. Most major markets – in Asia, Europe and the U.S. – are up between 0.5% and 1.0%.

Japan is leading the gains today, with the Nikkei 225 rising by 1.26%. It seems investors worldwide are hoping that the Iran–Israel conflict can still be defused. The issue will receive significant attention at the G7 leaders’ summit in Canada later this week. Whether these hopes are justified remains unclear, but it’s something investors clearly want to believe – and the global market rebound reflects this optimism.

Overall, if geopolitical tensions fade into the background, markets may well return to last week’s levels – the ones seen before Friday’s sell-off. A sense of cautious optimism still lingers, and there is hope that the S&P 500 will soon rise back above the 6000-point mark.