The Week in Markets
Kevin Warsh's first FOMC meeting is still reverberating, less for the on-hold decision than for what wasn't said. Northern Trust noted the new Chair halved the length of the policy statement, stripped out all hints of a future outlook and declined to submit his own "dot" – true to his confirmation-hearing declaration; "I don't believe in forward guidance." Their counter: projections don't need to be right to be useful, since they reveal the Fed's reaction function – and with PCE inflation annualising above 4%, less guidance risks more volatile asset valuations. State Street Investment Management framed it as the first meaningful retrenchment from a transparency revolution dating back to 1994, warning that a quieter Fed could mean weaker policy transmission, drifting inflation expectations and higher term premiums – while conceding the "false precision" critique of the dot plot has merit. Their prescription: refine the message, don't go dark.
📉 Payrolls: soft headline, softer conspiracy – May's "flukes" unwind
June's US jobs report landed well below expectations, but asset managers see reassurance rather than alarm. Western Asset Management highlighted that private payrolls rose just 49,000 with May revised down by an offsetting -50,000 – almost entirely restaurants & bars, where the World Cup hiring theory has now been fully erased from the data. Strip out the noise, they argue, and neither month moves the needle: wages are annualising around 3.5%, consistent with 2% inflation, and falling oil should drag prices lower still – leaving talk of Fed tightening misplaced. Aviva Investors noted markets read it similarly – payrolls of 57,000 versus 113,000 expected, yet unemployment unexpectedly fell to 4.2%, a picture of an economy cooling without stalling that saw near-term rate-hike expectations decline significantly over the week.
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📈 Q2 review: 'Strait back to it' – oil's collapse and an 88% semiconductor surge
The quarter's numbers were remarkable. Royal London flagged the S&P 500's best quarter since the post-pandemic recovery of 2020 and tech's best since 2001, with the Philly semiconductor index up over 88% and Korea (+67%) and Taiwan (+40%) the standouts – even as their Investment Clock edges toward Stagflation, a reading that could reverse quickly if oil stays low. Aviva Investors put Brent's 38.4% quarterly decline as the largest since 2020, though a sharp 11% two-day slide in chip stocks on profit-taking late in the week is one to watch. Pacific Asset Management traced the turn to the US–Iran ceasefire signed at Versailles on 17 June, noting Brent ended the month near $73 versus April highs of $118 – and that Warsh's hawkish debut, counterintuitively, reassured markets on the Fed's inflation credibility and underpinned a Treasury rally. Their watchword for a provisional peace: diversification.
🌏 Emerging markets: looking beyond energy prices to chips and governance
Franklin Templeton's Emerging Markets Insights flags three things to watch. Cheaper energy – oil near pre-war levels post-MoU, with the pace of Gulf repair driving the next leg down – matters most for lower-income EMs whose recovery hinges on it. A global rotation out of hyperscalers into chip makers puts Asia in the driving seat, and with capacity sold out through 2027 they see limited earnings risk despite elevated valuations. And Malaysia has joined South Korea and Singapore with Value-Up governance reforms – though without fresh capital commitments from its GLICs, the valuation impact is likely limited. Longer term, they see Latin America's copper, lithium and rare-earth reserves cementing the region's role in the energy transition.
🔍 Small caps: a 33% earnings rebound to close the valuation gap?
Janus Henderson Investors's chart to watch makes the case that global small caps – long held back by floating-rate debt, a sluggish economy and a drawn-out destocking cycle – are forecast to grow earnings 33% this year and 17% next, outpacing large caps (20% and 14%). With lower funding costs, US tax deductions, AI demand and nearshoring all lending support, they argue a return of small caps' historical growth premium could see the valuation discount to large caps finally narrow.
🪙 Gold's 'healthy breather' – but 84% of central banks still want more
Invesco's David Chao argues gold's retreat reflects higher real yields, a firmer dollar and rate-hike expectations that are now largely priced in – and since he doubts the Fed will actually raise rates, with oil near pre-crisis levels and the labour market soft, the yield headwind should fade. The structural thesis remains intact: price-insensitive central-bank buying (a World Gold Council survey found 84% of central banks plan to lift holdings over five years), geopolitical risk premia and reserve diversification away from traditional safe assets.
The week ahead - economic calendar
📅 Monday, July 6, 2026
10:00 🇪🇺 Eurozone Retail Sales (May) 15:00 🇺🇸 US ISM Services PMI (Jun) — prev 54.5
📅 Wednesday, July 8, 2026
03:00 🇳🇿 RBNZ Interest Rate Decision — markets price ~80% chance of a hike to 2.50% 19:00 🇺🇸 FOMC Meeting Minutes (Jun) — the first under Chair Warsh
📅 Thursday, July 9, 2026
02:30 🇨🇳 China CPI (Jun)
📅 Friday, July 10, 2026
07:00 🇩🇪 Germany CPI final (Jun) 13:30 🇨🇦 Canada Labour Market Report (Jun) — prev unemployment 6.6%
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