Alive and well, the US/Iran war, which we were told would last about four weeks, entered its 100th day over the weekend despite weeks of multiple fake reports of its demise and a Trump declaration back on April 17th that the Strait of Hormuz had re-opened (still waiting for that one). The odds of a swift resolution lengthened further as Iran and Israel exchanged fire on Sunday for the first time since early April and oil prices predictably spiked in response.

Traders in Asia picked up where their Wall Street brethren had left off the previous Friday by furiously offloading tech stocks on Monday, but there was a solid bounce in New York as dip buyers swarmed in to scoop up bargains from the tech wreckage ahead of Wednesday’s final set of inflation data before the next Federal Reserve rate-setting meeting on June 17th.

After hours, OpenAI joined Anthropic and SpaceX in confirming an imminent IPO, while at the same time reports began to emerge of the US government possibly taking a taxpayer-funded stake in the company.

Stocks continued higher on Tuesday morning as oil prices and interest rates eased. The dip-buying frenzy quickly faded however as concerns re-emerged about the lofty valuations of some of the Big Tech/AI names, particularly those that had spiked over the last couple of weeks and sparked another orgy of tech selling, further fueled by news that Iran had downed a US military helicopter and also a sense that institutional investors were unloading some of their tech holdings in order to free up funds to buy SpaceX stock on Friday.

But the dip-buyers stepped back in after lunch to stop the bleeding and the indexes eventually closed a wildly volatile day only moderately lower.

The US launched fresh attacks on Iran in response to the helicopter incident and Trump’s increasingly rambling rhetoric got more threatening, but there is clearly headline fatigue on Wall Street right now. The main business of the day on Wednesday was the May CPI data which showed inflation soaring to 4.2%, up a full half a percent from the previous month. The last time CPI was above 4% was in 2023 when the Federal Reserve was in a cycle of raising the Fed Funds Rate up to 5.325%. It’s currently 3.625%. The idea of any upcoming rate cuts now looks highly fanciful.

The spicy inflation print sent stocks nosediving again with tech names once more leading the charge lower. This time the dip-buyers were conspicuous by their absence. After hours, Oracle disappointed with an underwhelming earnings report and traders dumped the stock.

Thursday was the final ever day of a stock market without SpaceX in it (see ARTICLE OF THE WEEK below). The European Central Bank (ECB) raised local interest rates and the May PPI report showed that wholesale inflation in the US rose by the most since the dark days of 2022 and is now running hot at 6.5%.

The chaotic TACO rollercoaster kicked back in with Trump promising hellfire in the morning but by lunchtime had abruptly called off air strikes and told us for the umpteenth time that a peace deal is basically done and will be signed in days. Oil prices and interest rates fell and the bulls jumped back in the driving seat as traders chose to interpret all this rather positively.

The biggest IPO in history by a factor of three landed on Friday with SpaceX’s initial price of $135 valuing the firm at ~$1.8 trillion which instantly made it one of the top ten largest companies in the world. The price ended the session at a little over $160 and the indexes made more gains to close the week in the green on a cautiously growing hope that maybe, just maybe, this time some kind of war resolution might possibly be for real.

If you are not yet a financial planning or investment management client of Anglia Advisors and would like to explore becoming one, please feel free to reach out to arrange a complimentary no-obligation discovery call with me.

ARTICLE(S) OF THE WEEK ..

Lots of chatter last week about some (but not all) of the indexes changing their policies to accommodate swift inclusion of SpaceX stock and likely Anthropic and OpenAI as well and thereby impose often unwanted ownership upon retail investors in their investment and retirement accounts.

Two insightful articles from Nick Maggiulli and Callie Cox of Ritholtz Wealth Management cut through the noise on where we stand on this and what it could really mean for your investments.

.. AND I QUOTE ..

“At $135 a share, you have to believe everything will work fantastically, things that have never, ever happened before … you’re betting that the business exists already.”

Cory Johnson, Epistrophy Capital Research chief market strategist on the SpaceX IPO

LAST WEEK BY THE NUMBERS:

Last week’s S&P 500 market color courtesy of finviz.com

* SPY, a US Large Cap ETF, tracks the S&P 500 index, made up of 500 stocks from a universe of the largest US companies. It rose 0.7% last week, is higher by 12.1% over the last three months and is up 9.1% so far this year.

* IWM, a US Small Cap ETF, tracks the Russell 2000 index, made up of the bottom two-thirds in terms of company size of a universe of 3,000 of the largest US stocks. It rose 2.7% last week, is higher by 19.0% over the last three months and is up 19.2% so far this year.

* VXUS, an International Non-US ETF, tracks the MSCI ACWI Ex-US index, made up of over 8,500 of the largest names from a universe of stocks issued by companies from around the world excluding the United States, in both developed and emerging markets. It rose 4.7% last week, is higher by 11.8% over the last three months and is up 13.7% so far this year.

Data shown is total return (including dividends)

INTEREST RATES:

* FED FUNDS RATE * 3.625% (unchanged from a week ago)

* PRIME RATE ** 6.75% (unchanged from a week ago)

* 3 MONTH TREASURY 3.78% (3.78% a week ago)

* 2 YEAR TREASURY 4.09% (4.17% a week ago)

* 5 YEAR TREASURY 4.21% (4.29% a week ago)

* 10 YEAR TREASURY *** 4.48% (4.55% a week ago)

* 20 YEAR TREASURY 4.98% (5.03% a week ago)

* 30 YEAR TREASURY 4.97% (5.01% a week ago)

Data courtesy of the Federal Reserve and the Department of the Treasury as of Friday’s market close.

* Decided upon by the Federal Reserve Open Market Committee at periodic meetings 8x a year. Used as a basis for overnight interbank loans and for determining high yield savings interest rates.

** Wall Street Journal Prime Rate as of Friday’s close. Tending to move in lockstep with the Fed Funds Rate, this measure is used as a basis for determining certain consumer loan interest rates such as credit cards, auto loans, personal loans, home equity loans/lines of credit and securities-based lending.

*** Used as a basis for determining mortgage interest rates.

AVERAGE 30-YEAR FIXED MORTGAGE RATE:

* 6.52%

One week ago: 6.48%, one month ago: 6.37%, one year ago: 6.84%

Data courtesy of the Federal Reserve Bank of St. Louis.

INTEREST RATE EXPECTATIONS:

Where will the Fed Funds interest rate be after the next rate-setting meeting on June 17th?

* 0.25% higher than now .. 0% probab...