There’s a New Sheriff in Town

For the week ending 18 June 2026

As of midday Thursday, global equities were mixed on the week, caught between Mideast optimism and a hawkish Fed. The yield on the US 10-year Treasury note edged down 5 basis points from Friday to 4.43%, while the price of a barrel of West Texas Intermediate crude fell $10.50 to $74.50. Volatility, as measured by futures contracts on the Cboe Volatility Index (VIX), were steady at 18.6.

MACRO NEWS

Warsh opens a new chapter at the Fed

New Fed Chair Kevin Warsh held his first press conference on Wednesday, and his message was clear: fighting inflation comes first. The Fed held interest rates steady at 3.50–3.75%, with every voting member in agreement — the first unanimous vote in a year. But overall, the tone of the meeting was tougher than many investors expected. Warsh shortened the Fed’s policy statement to about 130 words (less than half its usual length) and put price stability front and center, ending with a firm promise: “The Committee will deliver price stability.” While Warsh did not contribute to the Fed’s dot plot, 9 of 18 FOMC members expect at least one rate hike later this year, and their inflation forecast for 2026 was raised to 3.3%.

Warsh also announced five new task forces to review how the Fed communicates, manages its balance sheet, uses data, thinks about AI and productivity, and approaches inflation. It’s a sign he wants to reshape how the Fed operates, not just how it sets rates.

The meeting’s hawkish tone should put to rest investor concerns over Fed independence. Additionally, forward guidance — a cornerstone of Fed strategy in the post-Global Financial Crisis world — now looks to be a thing of the past. Warsh said he would rather the Fed learn from market pricing than have the market learn from Fed forward guidance. US President Donald Trump reacted calmly to Warsh’s hawkish manner, saying “we have a good guy over there now.” Investors now expect roughly 1.5 rate hikes by year-end, up from less than one before the meeting. The shift contributed to a dramatically flatter yield curve.

Signed MOU sets the stage for the next round of talks

The US and Iran signed a memorandum of understanding on Wednesday that extends the ceasefire by 60 days, and sets in motion the gradual reopening of the Strait of Hormuz by Iran, and immediately lifts the US naval blockade of Iranian ports. Oil prices have continued to decline, trading in the mid-$70s on Thursday morning after peaking near $120 per barrel in late March. Iran reaffirmed that it will not develop nuclear weapons and committed at a minimum to diluting its stockpile of enriched uranium under IAEA supervision, with a full final deal yet to be negotiated. Sanctions relief, including the unfreezing of Iranian assets, will be phased and performance based. The agreement also floats a potential $300 billion reconstruction fund that would be backed by countries in the Gulf region. In addition, Iran has reportedly made backchannel commitments not included in the text.

While there are many critics of the agreement, from a market perspective, the reopening of the Strait of Hormuz and dwindling odds of a return to full-scale warfare are good enough to allow investors to turn their attention elsewhere.

According to Bloomberg, at least 31 supertankers are ready to set sail from the Persian Gulf, and 6 have already departed. In the US, the national average price of a gallon of gasoline has fallen back below $4.

QUICK HITS

At the conclusion of their summit in the French Alps this week, G7 leaders backed a joint declaration promising to boost military support to Ukraine and to strengthen sanctions against Russia. The statement also warns China to avoid any unilateral attempts to change the status quo, by force or coercion, in the East and South China Seas and across the Taiwan Strait.

US retail sales rose a solid 0.9% in May. Core sales, which exclude gas stations, building materials, autos and food services, rose 0.7%.

The International Energy Agency slashed its global oil demand outlook for this year as higher prices weigh on consumption, but they also said a post-war supply rebound could lead to an oil glut in 2027.

Late on Friday, the US government issued an export control directive, forcing Anthropic to restrict access to its most advanced models, Fable 5 and Mythos 5, to only US nationals. Anthropic opted to suspend global access entirely due to the difficulty of segregating users by nationality. Talks are underway between the White House and the company on loosening the restrictions.

Ahead of the G7 summit, President Trump threatened to impose 100% duties on French wines if France doesn’t repeal its digital services tax.

US pending home sales rose 3.8% May, though housing starts fell 15.4% last month, driven by a more than 40% decline in multifamily starts.

As was widely expected, the Bank of Japan this week raised its benchmark overnight rate 0.25% to 1%, its highest level since 1995. The bank said it sees “a risk of underlying CPI inflation deviating upward to a level above the price stability target of 2%,” suggesting more hikes are in the pipeline.

Retail sales in China fell 0.6% year over year in May, falling short of estimates. Property investment was also weak, declining 16.2% from the same month the year before. Industrial production was in line with forecasts, growing 4.5% on the year, though the output gains were concentrated in the tech sector.

On Tuesday, the European Parliament voted to ratify the US–EU trade deal.

The Bank of France cut its 2026 economic growth outlook to 0.5% from an earlier 0.9% forecast. It also raised its inflation view to 2.5% from 1.7%.

CPI in the United Kingdom held steady at 2.8% in May, lower than the median forecast for a 3% gain. In the eurozone, the inflation rate remained unchanged at 3.2%.

This week, President Trump invoked the Defense Production Act, allowing Pentagon subcontractors to work together in ways that might be considered anticompetitive under normal circumstances. The White House delegated authority to Secretary of Defense Pete Hegseth to pursue voluntary agreements with private industry that would “help provide for the national defense” and replenish munitions expended in the Iran war.

THE WEEK AHEAD

Monday: Canada CPI

Tuesday: Global preliminary PMIs

Wednesday: US new home sales

Thursday: US core PCE, durable goods orders; Q1 GDP revision

Friday: US trade balance

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Sources: MFS research, Wall Street Journal, Financial Times, Reuters, Bloomberg News, FactSet Research.