New York has been buzzing. The Knicks, the city’s celebrated basketball team, long starved of championship glory, finally delivered a victory that brought a ticker-tape parade to Manhattan. For locals, it was more than sport, it was a civic moment, with restaurants and bars reporting record sales as fans poured jubilantly into the streets.
The Fifa World Cup has been a triumph too. Stadiums are packed, fans from across the globe filling the streets, and even cynicism about “soccer” versus “football” drowned out by the sheer energy of the crowds.
Hotel occupancy rates have hit 95%, and Boston’s report that Scottish fans in kilts are drinking more beer daily than levels reached on St Patrick’s Day has become a talking point.
Broadway has added its own sparkle. Blockbuster shows like Ragtime and Giant have drawn international audiences, while outdoor concerts in Central Park and rooftop gatherings downtown have kept the city’s nights alive.
The weather has been glorious, adding to the allure of these events. New York thrives on spectacle, and this summer has delivered it in abundance.
Trump’s ‘peace’ deal faces credibility test
Against this backdrop of celebration, the past week has been dominated by US President Donald Trump’s announcement of a 60-day “peace” deal with Iran. Oil prices fell sharply, and markets cheered the relief.
Yet the political reaction has been far less positive. Few commentators believe the deal achieves any of the president’s original goals.
Critics point out that in order to reopen the Strait of Hormuz, the administration agreed to significant concessions – from easing certain sanctions and allowing limited Iranian oil exports to softening demands on Tehran’s regional military presence.
None of the original objectives of curbing Iran’s nuclear programme, limiting its influence in the region, or securing a permanent maritime guarantee have been met. Allies are sceptical, and internally Trump’s credibility has been dented.
With the mid-term elections approaching, Republicans face a difficult task explaining how this can be claimed as victory.
For markets, however, the politics have barely featured. Equity investors remain absorbed by falling oil prices and the continuing dominance of US technology, particularly AI.
The reopening of tanker traffic through Hormuz could bring immediate relief, but shipping insurers continue to charge elevated premiums, keeping transport costs high.
Opec’s reaction has been muted. Member states welcome stability but warn that supply discipline will remain tight. Inventories will take time to rebuild, and Brent crude is expected to hover at current high levels through the rest of 2026 before easing in 2027.
Equity markets have cheered the relief, but the mechanics of supply suggest normalisation will be slower than investors expect.
Warsh’s hawkish debut resets expectations
Kevin Warsh’s first press conference as chair of the US Federal Reserve took markets by surprise. His tone was markedly hawkish, stressing that inflation above the 2% target level for five consecutive years is untenable.
Futures markets, which had been pricing in modest rate cuts later this year, flipped sharply. Traders now expect policy rates to remain elevated for at least the next 18 months, with some even pencilling in the possibility of hikes.
The bond market reacted immediately. Short-term yields rose as investors adjusted to the prospect of tighter policy, while long-term yields held steady, reflecting confidence that Warsh’s stance will eventually anchor inflation expectations. The result has been a flattening yield curve, a classic signal of caution about growth momentum.
For households and businesses, the implications are clear – higher short-term borrowing costs, tighter credit conditions, and renewed pressure on the housing market.
AI dominates as SpaceX makes history
Dismissing doubts and derision, the equity market celebrated the historic SpaceX IPO.
The $75 billion raise, valuing the company at $1.8 trillion, was digested with ease, with shares surging nearly 50% post-listing.
Index funds absorbed the listing without disruption, while retail’s record participation was evident. Volatility has been contained, though expiring lock-up obligations later this year could test liquidity.
AI stocks continue to dominate leadership, supported by strong fundamentals and ongoing capital expenditure commitments. The rally extends beyond the usual headline names.
Energy and power businesses, data-centre Reits (real estate investment trusts), and chip equipment makers are all benefitting from the AI supply chain. The narrow breadth of the market remains a concern, with gains concentrated in a handful of mega-caps, but the secular growth story continues to attract capital.
The housing market is showing strain, with single-family starts at an eight-month low, underscoring the drag from higher rates. Warsh flagged housing as a vulnerability, yet policy bias remains hawkish.
Precious metals have also come under pressure as higher rates reduce the appeal of safe-haven assets. Gold ETF outflows have accelerated, while central buying has slowed.
Global growth slows, but AI and energy still lead
Globally, growth is slowing unevenly.
In the UK, consumer confidence surveys have hit decade lows, with GDP growth near 1% and inflation rising toward 4%. The Eurozone is struggling economically, with industrial production contracting in Germany and Italy, and inflation stubbornly near 3%. China remains steadier, with growth a little under 5%, supported by manufacturing and exports, though property sector weakness lingers.
Emerging Asia is resilient, buoyed by AI-linked exports and rising tourism receipts in Thailand and Vietnam, though inflation pressures remain elevated. Japan is expanding modestly, with wage growth finally outpacing inflation as the central bank gradually normalises monetary policy.
Our investment strategy remains anchored in AI businesses and the companies that provide the power and energy needed to sustain their growth. This is the secular theme that will continue to drive markets.
We also maintain exposure to weight-loss drugs, which are reshaping consumer behaviour and healthcare. To this we now add consumer staples such as Walmart and Costco. In an environment of higher rates and pressure on household budgets, these businesses stand to gain from value-seeking consumers.
On the cautious side, higher short-term rates will squeeze bank margins, but well-capitalised institutions with diversified fee income are better placed to manage the strain. IPO activity, such as SpaceX, will support asset managers and investment banks.
Defence, despite strong order books, has underperformed. Investor fatigue after two years of geopolitical uncertainty is taxing, and unless new shocks reignite demand, the sector may trade sideways.
America is bigger than the noise
The World Cup has shown that even in the face of cynicism, whether whining about advertising during rehydration breaks or the cost of tickets, the game thrives. Stadiums are full, fans are ecstatic, and the city is buzzing. The critics may carp, but the reality is success. The same holds true for the United States.
As America marks its 250th birthday, the noise around Trump’s peace deal, the construction of the White House Ballroom, and the mid-term battles is loud. Yet beneath it all, the economy and its businesses continue to move forward. AI innovation, consumer resilience, and the sheer scale of American enterprise remain unmatched.
Critics will always find fault, but they cannot diminish the stamina of a country that has endured for two-and-a-half centuries.
Just as the World Cup proves the game is bigger than the debate over its name, America’s 250th celebration proves the nation is bigger than the noise.
The markets, like New York City itself, are alive with energy – and that durability is the real story.
David Shapiro is the chief global equity strategist at Otto1890.
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