Geopolitical Shockwaves and Economic Signals

The main U.S. stock indexes closed the week mixed, affected by the Federal Reserve's decision and the escalation of tensions in the Middle East. President Donald Trump announced last Thursday that he will decide in the next two weeks whether the United States will join Israel in attacking Iran's nuclear facilities. Washington is believed to possess the military capability to penetrate Tehran's heavily fortified Fordow uranium enrichment plant. Iranian Foreign Minister Abbas Araghchi will meet with European foreign ministers in Geneva on Friday to discuss efforts to end Iranian enrichment. Reuters reported that Iran is willing to limit enrichment, but not to stop it, a stance that is unlikely to satisfy either Israel or the United States.

The Congressional Budget Office estimates that the House version of the "One Big Beautiful Bill" will add $2.8 trillion to the national debt over the next decade. The Congressional Budget Office (CBO) previously estimated the cost of the bill at $2.5 trillion. It should be noted that this estimate is based on current law, as the 2017 tax cuts expire at the end of this year, rather than current policy, suggesting a much smaller impact. Retail sales declined 0.9% month-over-month in May 2025, the largest decline in four months, while analysts were expecting a 0.6% drop. Industrial production fell 0.2% in May 2025, versus an expected reading of +0.1%. Manufacturing output, which accounts for 78% of total industrial production, rose slightly by 0.1%, below forecasts of 0.2%.

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