With earnings season basically wrapped up for markets, investor focus next week turns to the Fed announcement on Wednesday and geopolitics.

Market expectations for next week are heavily focused on the highly anticipated Federal Reserve interest rate decision Wednesday and the G7 Summit in France (Monday-Wednesday), both serving as critical barometers for global inflation, monetary policy, trade and geopolitics.

What will the Federal Reserve Do?

Markets are pricing in a near-100% probability that the Federal Reserve will hold interest rates steady at its upcoming meeting. However, the spotlight will fall squarely on new Fed Chair Kevin Warsh and his first press conference. Earlier in the year, traders were pricing in multiple rate cuts, but a combination of resilient macroeconomic fundamentals and energy price spikes forced a massive recalibration. Investors will scrutinize the Fed's dot plot and policy statements to gauge if a rate hike is in the cards.

The CPI and PPI inflation data last week reflect rising costs and make the new Fed Chair’s commentary important for markets. The headline year-over-year CPI came in at 4.2%, which is far above the Fed’s 2% mandate. A 6% slide in oil prices last week may help future inflation data, but costs are still elevated. Expectations for a rate cut have gone away for the year and the CME FedWatch Tool is pricing in a more than 50% chance of a rate hike into the December meeting.

Geopolitics: The Roller Coaster for Stocks, Energy

Geopolitical news continues to dictate the pace of equity and commodity markets. The equity market was a roller coaster last week but ended on a positive note after headlines skewed to a potential resolution to the conflict. Crude Oil prices fell sharply on the potential for a deal to end the conflict and the S&P 500, Nasdaq-100 and Dow Indexes all finished the week in positive territory.

On the domestic economic data front, next week features a slate of key economic reports, headlined by May's Retail Sales on Wednesday. Despite the ongoing inflation headwinds and pressure on the consumer, expectations are for an increase of 0.5% for May. Housing Starts and Permits, Pending Home Sales and ongoing regional manufacturing indexes (such as the Empire State and Philadelphia Fed surveys) are also due next week.

The Market Remains Near Record Highs

With this macroeconomic backdrop, the S&P 500 continues to hover near record highs. But market leadership remains intensely concentrated on artificial intelligence (AI) infrastructure and mega-cap tech. Positive geopolitical news may provide further optimism for risk-on assets, but any resolution to the conflict in the Middle East may need more time.

Investors will need to keep an eye on commentary from the Fed along with the ongoing geopolitical headlines next week.

Economic Calendar, June 15-19 (ET)

Monday, June 15
08:30 AM NY Empire State Manufacturing Index
09:15 AM Industrial Production
10:00 AM NAHB Housing Market Index
10:00 PM China industrial production
10:00 PM China retail sales 
10:00 PM China unemployment rate

Tuesday, June 16
FOMC meeting cycle begins
08:15 AM ADP Employment Change Weekly
08:30 AM Building Permits
08:30 AM Housing Starts
08:30 AM Export Prices
08:30 AM Import Prices
04:30 PM API Crude Oil Stock Change

Wednesday, June 17
07:00 AM MBA 30-Year Mortgage Rate, Applications
08:30 AM Retail Sales
10:00 AM Business Inventories
10:00 AM Pending Home Sales
10:30 AM EIA Crude Oil Stocks Change
10:30 AM EIA Gasoline Stocks Change
02:00 PM Fed Interest Rate Decision
02:00 PM FOMC Economic Projections
02:30 PM Fed Press Conference

Thursday, June 18
08:30 AM Initial Jobless Claims
08:30 AM Philadelphia Fed Manufacturing Index
04:00 PM Net Long-term U.S. Treasury International Capital (TIC) Flows

Friday, June 19
U.S. stock and bond markets closed for Juneteenth holiday

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