– Sepp Herberger
“The ball is round. The game lasts 90 minutes. Everything else is theory.”
Halfway through the year and, neatly enough, halfway through the World Cup. Some things have moved as expected, others have surprised, and many questions remain wide open. Will the US-Iran ceasefire finally hold? Will Argentina retain the title or can France steal one back? Is Kevin Warsh just Trump’s pawn or will he chart his own course as Fed chair? Can Don Carlo bring the Cup back to Brazil? Is Andy Burnham the right man to lead the UK? Is Thomas Tuchel the right man to lead England? Does SpaceX’s valuation make any rational sense? Can a semi-retired Modric lead Croatia to another deep run? Does the AI trade have any more room to run? Will Ronaldo sign off from the big stage with one last dance? And what about Belgium?
We will answer some of these questions below. The rest, you will just have to wait and see.
After three months of a ceasefire reinterpreted almost daily, June produced signatures. A fresh sixty-day ceasefire was announced on the 11th, and on the 17th President Trump signed the Islamabad Memorandum at the Palace of Versailles, with President Pezeshkian counter-signing in Tehran. The fourteen-point text ends the operations that began on 28 February, reopens the Strait of Hormuz, lifts the US blockade and sanctions, and lets Iran sell oil freely, with sixty days to settle the harder questions. Those remain open: the channel is still being cleared of mines, the talks slated for Bürgenstock were postponed, and the enrichment file and uranium stockpile have been deferred rather than resolved. The final week even brought a relapse of strikes on shipping and on US sites in Kuwait and Bahrain. As we write, negotiators are due to reconvene in Doha.
Markets read the glass as half full and drank deeply. Crude fell from around $87 a barrel at the end of May to roughly $69 by month-end, with Brent at four-month lows as Gulf exports recovered toward three-quarters of pre-war levels. The supply-shock premium that defined the spring has largely deflated, though crude still sits some 20% above where it began the year. So the war is formally over and the strait formally open, yet almost nothing structural is settled.
Over June 16th to 17th Kevin Warsh chaired his first FOMC. While the rate decision was a foregone hold at 3.50-3.75%, the manner of it marked a break: the statement was cut from 341 words to 130 and stripped of forward guidance, the median 2026 dot shifted from an implied cut to an implied hike, and Warsh declined to submit a dot of his own. The withdrawal of guidance is in itself neither hawkish nor dovish, but a structural change in how the Fed communicates and arguably the more consequential development in line with Warsh’s philosophy and criticism of the Fed prior to appointment as an institution which has overstepped its mandate and caused complacency in risk markets.
Regardless, markets read the package as hawkish against a hot backdrop of 4.2% May CPI and a labour market that refused to crack. The damage to equities came through real rates, the enemy of long duration assets such as tech stocks: collapsing oil crushed breakevens even as the front end rose, lifting real yields while nominal long yields drifted lower. The Nasdaq fell about 2.7% and the S&P 500 about 1.0%, with the selloff led by this previous winners, the Magnificent Seven mega-caps. The equal-weight S&P (+2.4%) and Russell 2000 (+3.7%) rose as investors rotated to value and small caps.
This played out against arguably the most anticipated listing in market history. On 12 June SpaceX debuted on the Nasdaq, priced at a fixed, take-it-or-leave-it $135, raising roughly $75bn at a valuation near $1.77 trillion, the largest IPO ever and unusually reserving about 30% for retail. The debut delivered: the stock opened at $150 and closed up 19% at $160.95, briefly carrying the market cap above $2 trillion and past Tesla, and by the 16th touched $225 intraday, overtaking Amazon and Microsoft. Then gravity asserted itself, the shares falling for three straight sessions back toward $153 by late June, still above the IPO price but a fifth below the high, caught in the same higher-real-rate tide that hit the rest of tech. The fade also served as a barometer: it was, per reporting, one reason OpenAI was said to be weighing a delay of its own listing into 2027, a reminder that appetite for the frontier-tech story is real but no longer unconditional.
If the US story was about the price of money, Asia’s was about the price of memory. A report that OpenAI might delay its IPO, layered on anxiety about AI capital spending, triggered a violent rotation through the memory complex: on 23 June the Philadelphia Semiconductor Index fell 8%, rallied around 5%, then fell almost 5% again, while Korea’s Kospi tumbled some 10% intraday and tripped a circuit-breaker. Yet the fundamental signal was the opposite of bearish. The proximate cause was a memory shortage so acute it is now raising prices across the consumer chain: Micron’s results on the 24th were emphatic, revenue quadrupling toward roughly $41bn with output sold out through end-2026, while Apple raised iPad and MacBook prices citing memory costs and Microsoft lifted Xbox pricing. The result was an unusual wedge: the memory names surged, the Philadelphia Semiconductor Index actually finishing June up about 3.8%, while the hyperscalers that buy their chips and the Nasdaq’s mega-cap complex carried the losses. In a market this concentrated, an index-level selloff can mask demand that has rarely been stronger.
Britain staged a slow-motion change of government. After Labour’s heavy losses in May’s local elections, Andy Burnham, the Greater Manchester mayor on the party’s left, won the Makerfield by-election on 18 June to secure a seat, and Starmer resigned on the 22nd. A leadership contest is now under way, a new prime minister due by 1 September, though possibly as early as 17 July should the contest become a “coronation”.
The man who would be king has laid out his big-picture plan as follows: devolution of power from Westminster to local government, the biggest housebuilding drive since the Second World War, renationalisation of key utilities, an industrial policy, and welfare reform aimed at getting the young into work. It all sounds like a nice wishlist most could agree on.
However, very little detail has been offered on how to do it and, above all, how to pay for it. The spectre of the Truss mini-budget shadows any talk of looser discipline, and Burnham’s team has gone to great lengths to convince investors that current fiscal rules will be honoured. He has also committed to honour Labour’s manifesto pledge not to raise income taxes or VAT. The promise is that everything will change, which is so often how everything stays the same. Something will have to give. Perhaps a general election will be required to secure a mandate? Heavy is the head, as they say.
Two threads tie the rest together: higher real yields and the central banks behind them. The ECB raised rates 25 basis points on the 11th, its first hike since 2023, tightening into the same energy shock that has pushed euro-area inflation above 3%, a sharp turn for a bank still cutting a year ago. In the US the curve flattened, the two-year near 4.19% and the ten-year at about 4.49% as breakevens collapsed; credit barely flinched, spreads still tight by historical standards. Gold was the clearest casualty of firmer real yields and a stronger dollar, falling about 11% to roughly $4,026 an ounce and a fourth straight monthly loss, though with central banks still buying the structural case, in our view, is intact. As we write, with oil deflating, the question is whether June’s real-rate squeeze persists or fades.
We signed off last month’s letter by saying markets were priced to perfection and that very little was actually settled when it comes to Iran. These words ring truer now that both have come to the fore. The exuberance of recent months always rested on unstable foundations; a knee-jerk reaction to any change in conditions was to be expected, and we did not have to wait long. What we said then remains true now. But it also had a flip side. Fundamentals remain strong, and parts of the market that were unloved are having their moment in the sun. As the World Cup progresses, we are already seeing underdogs knock out heavyweights of yesteryear. However, in the end we still expect the trophy to be lifted by the most resilient, deepest, and most diverse squad of talent. The same can be said of portfolios. It is not about going all in or being overly cautious. It is about finding the right balance, diversifying sources of returns, and, most importantly, maintaining and executing a clear plan with long-term goals in mind.
If you have any questions about the themes discussed in this article, please do not hesitate to get in contact with us: info@bedrockgroup.com
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