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6/18/2025
Weekly Edition
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.
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.
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.