Global Equities Make Gains

Global equities made gains this week. The S&P 500 and the Dow Jones increased 0.87% and 1.59%, respectively. The Nasdaq rose slightly by 0.25%. The US 10-year Treasury note declined several basis points to 4.18% while the price of a barrel of West Texas Intermediate crude oil decreased to $82.27. Volatility, as measured by the CBOE Volatility Index, was relatively unchanged on the week, closing Friday at 12.46.

US Inflation and Labor Market Cool

Headline inflation declined 0.1% in June, bringing the rise of the consumer price index to 3% on a year-over-year basis. The news, along with comments from Fed Chairman Jerome Powell, prompted a bond rally and encouraged investors. As Powell testified to Congress this week, there are signs that both inflation and the labor market are cooling. He also assured that despite commercial real estate loans being a continued risk, stress tests indicate that large banks are well positioned to withstand a deep downturn. Markets are now pricing in a first rate cut in September followed by a second in December.

Updated Market Figures

International Developments

UK, France, Iran Election Results

The recent French elections resulted in a highly fractured parliament, leading Prime Minister Gabriel Attal to offer his resignation, although President Macron asked him to stay until a successor is appointed due to the upcoming Olympics. The New Popular Front won the most seats (182), but no party secured a majority, making coalition formation difficult. In the UK, Keir Starmer’s Labour Party achieved a significant victory with 413 seats, ending 14 years of Conservative rule, and now faces the challenge of stabilizing the country post-Brexit. In Iran, reformist Masoud Pezeshkian won the presidential election with over 53% of the vote, promising to ease moral policing and re-engage with the West on nuclear talks, but he faces resistance from conservative institutions. His ability to revive the 2015 nuclear deal will be a key test of his presidency, especially given the complex international dynamics and potential impact of the upcoming US presidential elections.

Japan, Philippines Sign Defense Pact

On July 8^th, the Philippines and Japan signed a troop access agreement to strengthen defense ties amid concerns over China’s Pacific influence. The agreement, officially termed the Reciprocal Access Agreement (RAA), was called an “instrument of trust” by Filipino officials and a change to the regional “status quo” by Japan. The agreement focuses on facilitating bilateral troop movements. The agreement came amid the second two-plus-two foreign and defense talks between Japan and the Philippines. Discussions between the two Indo-Pacific states focused on shared concerns over China’s South China Sea actions and efforts to boost economic cooperation between Manila and Tokyo.

Modi Visits Moscow for First Time Since Ukraine War

Indian Prime Minister Narendra Modi met Russian President Vladimir Putin in Moscow on Monday for his first visit since Russia invaded Ukraine in 2022. Modi’s visit aimed to deepen the strategic partnership between the two countries, focusing on trade, defense, and regional issues, despite Russia’s closer ties with China. Modi emphasized the importance of India-Russia relations and the need for a peaceful resolution to the Ukraine conflict. The visit underscores the resilience of their bilateral ties.

US Social & Political Developments

Tropical Storm Beryl Causes Power Issues in Texas

Over a million Texas homes and businesses were left without power days after Hurricane Beryl made landfall as a Category 1 hurricane. CenterPoint Energy estimates that 1.1 million customers will have power restored by Sunday, but about 400,000 could be without power for a week. President Joe Biden has declared a major disaster for Texas, with the Red Cross setting up shelters to help those affected by the power outages and extreme heat.

Bipartisan ETHICS Act Introduced

A bipartisan group of Senators, including Democrats Jeff Merkley and Gary Peters and Republicans Josh Hawley and Jon Ossoff, introduced a bill to ban members of Congress, their spouses, and dependent children from trading individual stocks. The “ETHICS Act” aims to address concerns about lawmakers profiting from insider information and would require divestment from individual stocks by 2027, directing investments into mutual funds instead. The bill includes substantial penalties for non-compliance, with fines equaling the greater of a lawmaker’s monthly salary or 10% of the asset’s value. Despite previous attempts at similar reforms, this proposal emphasizes stronger enforcement and broader support, though passage remains uncertain.

Corporate/Sector News

Boeing to Plead Guilty to Criminal Conspiracy Charge

Boeing has agreed to a plea deal to avoid a criminal trial over charges of criminal fraud conspiracy related to two fatal 737 MAX 8 jet crashes in 2018 and 2019, which killed 346 people. As part of the deal, Boeing will pay a $240 million fine and commit over $450 million towards compliance and safety initiatives over the next three years. This agreement follows a previous Deferred Prosecution Agreement with the DOJ in 2021, which Boeing violated by failing to implement required compliance measures. Families of the crash victims oppose the plea deal, seeking greater accountability and prosecution of Boeing’s corporate leadership.

Paramount-Skydance Merger

Paramount plans on merging with Skydance, injecting needed capital into the struggling legacy studio and ending the Redstone family’s long Hollywood presence. David Ellison, Skydance’s founder and son of Oracle’s Larry Ellison, will lead the new entity, emphasizing a “tech hybrid” approach to remain competitive. This deal, expected to close in September 2025, involves a $28 billion valuation and an $8 billion investment from the Ellison family and RedBird Capital. The merger aims to revitalize Paramount, including a rebuild of the Paramount+ streaming service and identifying $2 billion in cost efficiencies.

Tesla’s Robotaxi Faces More Delays

Thursday, Tesla’s stock fell 8% after reports came out that the company might delay its robotaxi event, which was previously scheduled for August 8th, to October due to it requiring more time to build the vehicle prototypes. The robotaxi has been part of Tesla’s Master Plan for eight years, and CEO Elon Musk has been mentioning the robotaxi event since April of this year. Shares of Uber and Lyft both rose 6.1% and 4.6%, respectively, following the news.

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