Market index returns

Week to date since June 11, 2025 as of June 18, 2025

Index definitions: Global Real Estate = FTSE EPRA/NAREIT Developed Index; Global Infrastructure = Dow Jones Brookfield Global Infrastructure Index; Natural Resource Equities = S&P Global Natural Resources Index; Commodity Futures = Bloomberg Commodity Index; TIPS = Barclays US TIPS Index; Global Equities = MSCI World Index; Real Assets Index = 30% FTSE EPRA/NAREIT Developed Index, 30% Dow Jones Brookfield Global Infrastructure Index; 15% S&P Global Natural Resources Index; 15% Bloomberg Commodity Index, 10% Barclays TIPS Index. Source: Bloomberg, DWS. Past performance is not indicative of future results. It is not possible to invest directly in an index.

Market commentary:

Energy prices and risk premiums rose on the expansion of Israel’s Middle East war to include Iran. The strikes on Iran have not targeted energy infrastructure, yet, and supply routes such as the Strait of Hormuz have remained open, but traders priced in a higher probability of disruption. The U.S. administration put a two-week timeline on its decision whether to become more directly involved. Iran has been actively working diplomatic channels to de-escalate the conflict while trying to preserve its ability to enrich uranium. On the trade front, officials and market participants also looked forward to the July 9 tariff deadline set by the U.S. Meanwhile, political pressure in the U.S. rose as the Federal Reserve’s FOMC held rates steady despite President Trump’s desire for big, beautiful cuts. The divergence in monetary policy action was evident as Central Banks in Switzerland, Sweden, and Norway (unexpectedly) cut rates to manage the impact of global trade actions. The coming week looks to be busy with eighteen central banks, representing nearly half of global GDP, scheduled to announce decisions.^[1]

The Real Asset Index outperformed broader Global Equities, which benefitted from leadership from Commodity Futures and Natural Resource Equities as they priced in potential supply threats. Global Infrastructure, Global Real Estate, and U.S. TIPS lagged the Real Asset Index but outperformed broader equities, illustrating the potential diversification benefits of Real Assets. Returns for broader global equities landed in negative territory as the Health Care, Consumer Discretionary, Materials, and Consumer Staples sectors lagged the most. The Energy, Technology, Utilities, and Real Estate sectors outperformed the broader global equity market. Among other indicators we track, the VIX, an index that measures the expected volatility of U.S. stocks, ended the period higher by 17% at 20.1. Credit spreads were stable as investment grade spreads widened one basis point and the high yield segment saw spreads tighten by one basis point as it benefitted from higher energy exposure. Gold prices were flat during the period as was the U.S. dollar. Oil prices rose 10% to end at $75.1 as traders priced in the possibility of a broader threat to oil supplies in the Middle East. Breakeven spreads rose 5 basis points (bps) for the 5-year segment and 4 bps for 10-year.^[1]

Why it matters: We continue to monitor economic data, where tariff-related inflation has yet to be realized while employment data has continued to soften. We cannot help but wonder whether the Fed has been so focused on its inflation mandate that it is underappreciating the nascent weakness in employment.

This week we will review the latest U.S. data and monetary policy decisions.

• U.S. Data: The U.S. Census Bureau released Retail Sales data for May, showing that headline sales fell -0.9%, which was worse than expectations of -0.6%, and below the revised reading of -0.1% in the prior period. Excluding autos, retail sales fell -0.3% for the month, worse than the prior month which saw data revised down to flat, from +0.1%. The Control Group series, which feeds into the PCE measure favored by the U.S. Federal Reserve, showed an increase of 0.4%, which was up from the prior revised reading of -0.1%, and ahead of expectations. The Bureau of Labor Statistics reported Import Prices were flat month-over-month, which was ahead of expectations of -0.2% and the prior reading of 0.1%. The Federal Reserve reported that Capacity Utilization fell to 77.4% for May, down from April’s 77.7%. The utilization data has been trending down since hitting a recent high of ~81% in 2022. The jobs data saw initial claims stabilizing at the higher end of the range for the year and continuing claims illustrated the potential softening in the labor market.^[1]
• Mixed signals from the Far East: The Bank of Japan (BoJ) maintained its policy rate at 0.5% during its June meeting, as widely expected. The BoJ last raised the policy rate in January of this year. Governor Kazuo Ueda’s press conference tilted dovish as U.S. tariffs and escalating Middle East tensions complicate the task of raising still-low interest rates. The BOJ's decision to slow its bond stimulus also suggests it will move cautiously in removing remnants of its massive, decade-long stimulus. Nonetheless, the bank also provided several arguments for why it should persist with rate hikes, albeit slowly, highlighting inflation risks tied to rising food and oil prices. There were no changes made to the BoJ’s prior assessment of the Japanese economy as it expects growth to slow and then pick up again, influenced by changes in offshore economies. Investors will therefore be keeping a close eye on the global economy as a precursor to a potential shift in BoJ policy.^[1]
• Fed stays Firm: The U.S. Federal Reserve’s FOMC held rates steady in their last meeting as they stayed in “wait and see” mode. The Fed faces mounting challenges as uncertainty remains “unusually elevated” and the voting committee members remained biased to the downside of the rate cut tally, all well below the 2.5% of cuts talked about from the Trump administration. More than a third of the policymakers forecast no cuts by the end of the year, two of them predicted a sole 25 bps cut, while almost half of the members estimated fewer than 50 bps in cuts by year end. A “nice” cut of 2.5% favored by Trump would push money into riskier assets and likely weaken the dollar potentially stoking inflation, which could work against both fiscal and monetary policy goals.^[1]

Real Assets, Real Insights: This week we look at resilience in Canadian retail real estate, the cause of Spain’s recent power outage, and the growing sensitivity surrounding rare earth minerals.

• Retail Shopping (Real Estate): The Canadian company Primaris Real Estate Investment Trust announced a transaction to acquire the Lime Ridge Mall in Hamilton Ontario. The property was managed by Cadillac Fairview and was sold for $416 million in the form of a mix of cash, REIT Unit shares, and preferred units (shares). The company believes that the property will contribute to its goal of upgrading its portfolio and acquiring assets in growing markets and that the capital mix of the payment will not impact the company’s financials. The company was launched in 2022 and has been acquiring old malls hoping that they can perform better than expected but it hasn’t all gone as planned. The company had exposure to the recent bankruptcy of the Hudson Bay retailer and had to dispose of leases it could not re-let.^[1]
• User Error (Infrastructure): The main findings from the preliminary report regarding the cause of the April 28th power outage on the Iberian Peninsula were presented this past week. According to the report, no evidence of cyberattack sabotage was evident and the blackout resulted from a combination of technical factors, namely grid instability due to low levels of system inertia, inadequate response by certain thermal and combined-cycle power plants responsible for maintaining voltage, and a lack of coordination in voltage regulation and system protection. The committee also ruled out solar photovoltaic generation as the cause. The final report is expected by October 2026. Initial actions to prevent another blackout in the future have already been taken, including the European Investment Bank (EIB) backing a planned power link between Spain and France with an investment of €1.6bn. Spain and France's power system operator, Red Electrica and RTE, aim to launch a 400-kilometer project in the Bay of Biscay in 2028. The subsea interconnector would increase the amount of power that both countries can exchange from 2.8 gigawatts to 5 gigawatts. The poor electricity connections from the Iberian Peninsula to the rest of Europe were thrown into the spotlight after the recent power outage. More interconnectors for power exchange with other countries may help to prevent such events in the future, highlighting the potential for increased infrastructure investment.^[2]
• Critically rare (Commodities): The DWS CIO View recently highlighted the importance of rare-earth minerals to a widening area of fields. The minerals are used in technology and have become critical to the energy transition process, artificial intelligence, and even weapons manufacturing. The limited production sources and importance of the technologies they influence has heightened their importance in the political landscape. See link here: Critical minerals at the center of geopolitical tensions.^[3]