Admist Concerns Stocks Hit All Time High

With all the negative news recently… US stocks are hitting new all-time highs. Wait, what?

The Middle East is holding onto a tentative cease fire after 12 days of war against Iran’s nuclear program.  The Trump Administration’s tariff deadline of July 9 has come and gone and with it, an increase in some tariffs.  And softer economic reports are being posted as we roll into the summer months.

With all this, one would think the equity markets would be struggling just to keep their head above water.  But “climbing a wall of worry” is what bull stocks markets tend to do.  Add in investor expectations for a Fed interest rate cut within the next 90 days, and the S&P 500 finishes the first half of 2025 at a record high.

Not too long ago the US directly entered the Israel/Iran conflict by attacking three Iranian nuclear sites in an operation called “Midnight Hammer.”  It is reasonable for investors to be concerned that the conflict could escalate or draw the US into a protracted engagement.

Worries such as these would normally roil the equity markets.  But that has not been the case. Why? It’s simple, it has to do with oil.

Twenty percent of oil consumption travels through the Strait of Hormuz, which abuts Iran.  At first blush, one might think this would be a target for harassment by the Iranian regime, potentially disrupting lows and pushing global oil prices significantly higher.  To a world that is fighting tooth and nail against inflation, substantially higher oil prices would be economically problematic. 

But traders are betting this will not happen because, for many reasons, it is not in Iran’s best interest todo so.  Without getting too far into the weeds, know that most of the oil coming through the straight goes to India and the Far East (think China), not the US.  Since China is an Iranian ally, traders do not see a major disruption or a substantial oil price hike soon.  With this risk seemingly low at present, stocks have been free to march higher.  

Closer to home economic reports have been a mixed bag, owing a lot to the uncertainty surrounding trade policy. 

Much to the chagrin of the president, Fed Chair Jerome Powell continued to preach patience in front of House members and senators in testimony recently.  In short, Powell’s committee is waiting for more inflation data and a better feeling on the effects of tariffs before they OK an interest rate cut to support the slowing economy.

Just as the Fed is practicing patience, we have done so through a tumultuous first half of 2025.  We have kept our heads during turmoil in Ukraine, Washington, and Middle East.  And it has paid off!