The marquee event in the days ahead is the onset of World War III, tentatively scheduled for Wednesday.
I’m just kidding. I hope. Whatever happens (or doesn’t happen) in the Middle East as a result of Donald Trump’s decision to bomb Iran’s nuclear sites over the weekend, Tehran’s allies are unable, unwilling and in every case but China, both, to act on the regime’s behalf.
Russia’s tied up in Ukraine and even if they weren’t, the Kremlin has no realistic options for supporting Khamenei. I’m the furthest thing from a rah-rah patriot and I despise Benjamin Netanyahu, but the idea of the Russian military attempting to close Iranian airspace or otherwise impede joint US-Israel air strikes is nothing short of laughable. If you can’t conquer Kyiv from Belarus, then don’t talk to me about challenging the IDF, let alone the US military.
Kim Jong-Un has a lot of soldiers (two million of them in fact, inclusive of the standing army and reservists) but… well, I wonder about North Korea’s ability to sail all that way, and it’s a helluva long walk from Pyongyang to Tehran. I suppose Kim could nuke Seoul in solidarity with Khamenei, but I’m not sure that’d accrue to the benefit of an IRGC that’s thoroughly “shocked and awed.”
China could help, but they won’t. Xi Jinping has big plans, and I can assure you they don’t involve committing an untested PLA to any sort of live-fire exercises in defense of a lost cause. I don’t care how much oil’s involved.
So, no World War III. Whatever happens next, it won’t be that.
Meanwhile, back at the ranch, Jerome Powell will be on Capitol Hill this week where “one of the dumbest, and most destructive, people in government” will be interrogated by some of the other dumbest, and most destructive, people in government. Topics for Powell’s semi-annual congressional grilling session include America’s fiscal trajectory, inflation and Fed independence.
Late last week, a day on from deriding Powell in dangerously abrasive terms, Trump suggested the rest of the Fed Board should mutiny. He also rekindled the idea of firing Powell underscoring (again) the notion that the Supreme Court exercised extremely poor judgment in resorting to torturous legal logic to carve out an exception for the Fed while simultaneously handing Trump expanded powers to remove other agency heads.
The data docket’s crowded. On Friday, BEA figures are likely to show the Fed’s favored inflation measure was benign again in May. Consensus is looking for a 0.1% print from the MoM core PCE readout.
As the figure shows, that’d be a third straight cool read on underlying consumer price growth. Ostensibly anyway, that argues for the resumption of rate cuts, and although Powell’s keen to hold out, Chris Waller wants a cut at next month’s meeting.
The Powell-Waller divide’s a microcosm of the larger split on the Committee, where seven officials penciled in no cuts for 2025 in last week’s dot plot refresh, even as the median marker narrowly tipped the same two cuts as the March distribution.
Ahead of Powell’s testimony and the PCE release, traders will get an update on the Conference Board’s measure of consumer confidence for June. The Conference Board headline recovered smartly in late May following the US-China trade détente, and economists expect an even firmer read in Tuesday’s release.
The final read on University of Michigan sentiment’s due this week as well. The figure above shows you the rebound from the post-“Liberation Day” plunge on both measures of household moods.
Also on deck in the US: Preliminary reads on S&P Global’s PMIs for June (Monday), updates on the two national home price gauges (Tuesday), new home sales (Wednesday) and pending home sales (Thursday).
Good luck out there. And remember: In the event of a nuclear attack, Bert the Turtle says “duck and cover.”
