Shockwaves & All-Time Highs: Reading the Signals Beneath the Surface
What Iran's Nuclear Crisis, Fed Cues, and Record-Breaking Markets Reveal About the Road Ahead
After the Bombs: What Markets Are Telling Us
Last week, the world watched closely as the United States executed a precision strike on three of Iran’s nuclear facilities. The mission, dubbed Operation Midnight Hammer, used high-tech B-2 bombers and bunker-busting bombs to deliver serious damage. As expected, oil prices jumped right after the news. But what wasn’t expected? The markets stayed calm.
Despite dramatic headlines, the U.S. stock market didn’t panic. In fact, futures stayed steady. Trading volumes were normal. Investors didn’t stampede for the exits—they simply made smart, calculated moves.
What Did They Do?
Most investors took shelter in two familiar places: U.S. Treasuries and the U.S. dollar. When things get dicey globally, these are considered the safest bets. That’s what we call a “rush to liquidity.”
Gold Didn’t Shine—Here’s Why
Gold usually jumps when there’s geopolitical tension, but this time it barely moved. Why? The U.S. dollar got stronger, which makes gold more expensive in other currencies. That pushed down demand for the metal, keeping prices in check.
Bonds and the Bigger Picture
U.S. Treasury bonds rallied. The 10-year Treasury yield fell, signaling strong demand. This wasn’t just about fear—it also reflected investor confidence in the Fed’s ability to manage inflation and interest rates.
Chair Powell spoke to Congress and at a Fed press conference last week. He didn't push back on the market's current expectations for interest rates. That silence sent a message: the Fed might be okay with inflation rising a bit more if it keeps growth on track. That gave more fuel to the bond rally.
Why This Matters for You
The market isn’t reacting like it’s 2008 or 2020. Instead, it’s treating this as a controlled event with no signs of global economic breakdown. That means the long-term outlook remains stable—for now. But it's a moment that shows us how quickly headlines can shake confidence, and why smart, diversified planning matters more than ever.
Markets at All-Time Highs
Nvidia CEO Jensen Huang led a wave of insider selling as NVDA soared to an all-time high. According to public filings, as investors have piled back into the stock, betting on huge demand for chips to power AI applications, Nvidia insiders have sold more than $1bn USD of the company’s stock over the last 12 months. More than half that amount occurred this month as the California-based chips designer’s share price hit a new record high.
We took profit on many of our investors’ holdings last week. Did we “sell” because we think the markets are about to crash? No. Well, not yet anyway. We simply took profit at a good price and good time just days before the July 4th long weekend and at the end of H1/Q2 2025. What will be our next steps? We will reallocate the week of July 1, 2025 with an eye towards earnings season that will begin the second week of July. Our anticipation is that stocks will continue to rise, and bonds will continue to rally, until they don’t. Let’s explore that last sentence.
Geopolitical and tariff risks are decreasing as growth continues to accelerate. Meanwhile, the US YoY inflation rate increased 4.88% from 2.29% at the end of April 2025 to 2.41% at the end of May 2025. From his testimony before Congress last week and during his FOMC statement presser, we can reasonably derive that Fed Chair Powell has functionally taken a dovish stance. Powell spoke TWICE last week and each time he knew the impact his words were having on the markets’ yield-pricing. Thus, we reasonably infer that Powell intentionally allowed the term premia in the curve to price themselves. We believe that the inevitable outcome of Powell’s reluctance to push back on the markets’ pricing increases the probability of inflation accelerating.
Thus far, the focus in the media has been on Trump’s insistence that the Fed cut rates. We feel this is a distraction of best, a paper-tiger at worst. For, even were the Fed to cut rates immediately (thus cutting rates into inflation), the bond vigilantes would have their say on the yield-curve’s pricing of interest rates and, given current levels of liquidity, term premia would surely blow out.
Meanwhile, equities are aggressively rallying and market complacency is increasing. Similar to the S&P 500, NASDAQ 100, and even the Russell 2000, the Nikkei and, to a lesser extent, the DAX, are all showing more green days up and to the right. This positive momentum and incredible resilience doesn’t appear to be running out of steam simply because investors are taking profit. Undoubtedly, this type of activity will create pullbacks. But pullbacks are not crashes. And the macroeconomic environment proliferating this growth and liquidity will continue to push capital into equities and further out the risk curve. And, as this phenomenon occurs, FOMO will become contagious.8
Let me know if you'd like to schedule a mid-year strategy call or rebalance your portfolio in light of these shifting dynamics.
Warm regards,
Wallace R. Nichols, MBA, JD, CFP®
Principal & Chief Investment Officer
Asset Guidance Group, LLC
Endnotes
“US Strikes on Three Nuclear Facilities in Iran: What It Means for Macro and Markets,” ING Think
“Pentagon Briefing: US Strikes Iran Nuclear Sites,” CBS News
“US Financial Markets Resilience to Military Strikes,” St. Louis News
“US Treasury Yields Rally After Bombing Iran,” CNBC
“Investors Brace for Fallout of US Strike on Iran,” Investopedia
“Gold Subdued as Dollar Gains,” CNBC
“KCM Trade Market Commentary,” Zawya.com
TradingView.com