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This Week on Wall Street
Week of June 15, 2026
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Market Commentary
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Stocks opened the week with a broad rally after the United States and Iran reached a deal to end their war and reopen the Strait of Hormuz. The agreement, which the White House says is set to be signed Friday, would lift sanctions on Iranian oil, pull back the U.S. naval blockade, and restore shipping through a waterway that carries a large share of the world’s energy. Oil fell sharply on the news, with Brent sliding back toward the mid-$80s, and equities climbed across the board. The mood is a sharp turn from last week, when a chip-led selloff dragged the major indexes lower and handed the Nasdaq its worst day since the spring of 2025. Cheaper energy and a step away from conflict are a familiar tailwind for risk assets, and markets read the news as a clear positive. The story is not fully settled, though. The deal opens a 60-day window for talks over Iran’s nuclear program, and the practical work of reopening the strait, convincing tanker owners and insurers that passage is safe, will take time. The direction for now is toward calm, but the next two months still carry risk worth monitoring.
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The week’s main event is the Federal Reserve, which begins meeting Tuesday and announces its decision Wednesday. It is Kevin Warsh’s first meeting as chair, and the interest is less in the decision than in the tone he sets for his term. Recent data has made his job harder. Hiring came in well above forecasts in May, and inflation is still running above the Fed’s target, so the case for lower rates has weakened even though Warsh has long argued for them. Markets widely expect the Fed to hold its benchmark rate in the 3.50% to 3.75% range and to step back from any lingering bias toward easing. The meeting also brings a fresh set of policymaker projections and the dot plot, the chart that maps where officials expect rates to go. Warsh has signaled that he prefers to communicate less and to guide markets meeting by meeting rather than commit to a path, so how much weight he puts on those projections will be telling. He is also expected to lean on a longer-term argument: that productivity gains from artificial intelligence are a structural force capable of holding prices down over time. That view, which echoes the Fed’s patience during the 1990s technology boom, is why he may be comfortable leaving rates where they are rather than raising them to chase inflation. For now, the Fed’s preferred inflation gauge remains above its 2% goal, and a quick return to that target does not look likely.
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Beneath the week’s headlines, one quieter gauge has been drawing attention: the equity risk premium. The idea behind it is simple. An investor can earn a near risk-free return by holding a 10-year Treasury, so to own stocks instead they expect some extra reward. That extra reward is the gap between the earnings yield on the S&P 500, roughly the profit companies generate for every dollar of share price, and the yield on the 10-year. For most of the past few decades that gap ran somewhere between three and five percentage points. Today it has nearly closed. The 10-year yield has held above 4%, while the index’s earnings yield sits only a touch higher after a long climb in stock prices. The result is a premium close to zero, the thinnest since the dot-com era. It is worth being clear about what this does and does not say. By this measure, stocks look expensive relative to bonds, and investors are being paid little for the added risk of owning them. It is not a timing tool. History shows narrow premiums have been followed by both strong years and weak ones. What it offers is context: the cushion between stocks and bonds is unusually thin right now, and that is a backdrop worth keeping in view.
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Chart of the Week
Volatility and Returns Following New Fed Chairs
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Across the seven completed Fed-chair transitions since 1970, the S&P 500 returned about 8% on average over the following year, ranging from -21.2% under Greenspan to +17.7% under Yellen. Every one of those transitions saw a drawdown along the way, averaging about -17.5%. Since Warsh took over on May 22, the index is down about 0.6% with a maximum drawdown near 4.5%. The takeaway is that turbulence around a leadership change has been the rule rather than the exception, even in the years that finished higher. Results reflect a limited number of observations and are illustrative; they do not imply that a change in Fed leadership causes the moves shown.
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| Source: FactSet, Standard & Poor’s |
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On the Calendar
Economic Releases This Week
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| Monday |
None |
| Tuesday |
Housing Starts, Building Permits |
| Wednesday |
Retail Sales, FOMC Rate Decision, Summary of Economic Projections |
| Thursday |
Initial Jobless Claims |
| Friday |
U.S. markets closed for Juneteenth |
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Worth Reading
Stories to Start the Week
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| What is Newton? |
▼ 0–8
▬ 9–13
▲ 14–20
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Our Newton model determines the highest probability of future price direction using advanced algorithmic and high-order mathematical techniques on the current market environment. It scores securities over multiple time periods on a 0–20 scale (0 worst, 20 best). Trend and level both matter. A name moving from 18 to 16 still signals a strong level, with slight exhaustion in the trend.
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| Equities |
TREND |
THIS WK |
LAST WK |
| Small Cap | ▲ | 16 | 12 |
| Mid Cap | ▲ | 15 | 19 |
| Foreign Developed | ▬ | 13 | 9 |
| Emerging Markets | ▬ | 9 | 20 |
| Large Cap | ▼ | 7 | 15 |
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| Fixed Income |
TREND |
THIS WK |
LAST WK |
| High Yield Bond | ▬ | 11 | 5 |
| Floating Rate Bond | ▬ | 11 | 5 |
| Corporate Bond | ▬ | 10 | 8 |
| Intermediate Term Bond | ▬ | 9 | 5 |
| Long-Term Bond | ▼ | 8 | 10 |
| Short Term Bond | ▼ | 8 | 2 |
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| Sectors |
TREND |
THIS WK |
LAST WK |
| Health Care | ▲ | 16 | 7 |
| Real Estate | ▲ | 15 | 5 |
| Consumer Defensive | ▬ | 12 | 4 |
| Utilities | ▬ | 11 | 2 |
| Energy | ▬ | 10 | 8 |
| Consumer Cyclical | ▬ | 10 | 6 |
| Financials | ▬ | 10 | 4 |
| Industrials | ▬ | 9 | 11 |
| Communications | ▼ | 8 | 5 |
| Technology | ▼ | 6 | 19 |
| Materials | ▼ | 6 | 13 |
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| Market Segments |
TREND |
THIS WK |
LAST WK |
| Mid-Cap Value | ▲ | 16 | 18 |
| Small Value | ▲ | 15 | 9 |
| Large Value | ▲ | 14 | 6 |
| Small Growth | ▬ | 12 | 14 |
| Mid-Cap Growth | ▬ | 9 | 16 |
| Large Growth | ▼ | 6 | 19 |
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Notable Newton Moves This Week: The model captured a sharp rotation out of large-cap growth and into defensives and value as last week’s selloff played out. Technology tumbled from 19 to 6 and Large Growth fell from 19 to 6, while Large Cap (15 to 7) and Emerging Markets (20 to 9) also dropped hard. On the other side, rate-sensitive and defensive groups surged: Real Estate jumped from 5 to 15, Health Care from 7 to 16, Utilities from 2 to 11, and Consumer Defensive from 4 to 12. Value firmed across the board, with Large Value climbing from 6 to 14 and Small Value from 9 to 15, leaving value and smaller caps as the strongest reads heading into the week.
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Technical trading models are mathematically driven based upon historical data and trends of domestic and foreign market trading activity, including various industry and sector trading statistics within such markets. Technical trading models, through mathematical algorithms, attempt to identify when markets are likely to increase or decrease and identify appropriate entry and exit points. The primary risk of technical trading models is that historical trends and past performance cannot predict future trends and there is no assurance that the mathematical algorithms employed are designed properly, updated with new data, and can accurately predict future market, industry and sector performance.
Disclosure: Investing involves risk, including the possible loss of principal and fluctuation of value. Past performance is no guarantee of future results. This newsletter is not intended to be relied upon as forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of the date noted and may change as subsequent conditions vary. The information and opinions contained in this letter are derived from proprietary and nonproprietary sources deemed by Waterloo Capital to be reliable. The letter may contain "forward-looking" information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecast made will materialize. Reliance upon information in this letter is at sole discretion of the reader. Please consult with a Waterloo Capital financial advisor to ensure that any contemplated transaction in any securities or investment strategy mentioned in this newsletter aligns with your overall investment goals, objectives and tolerance for risk. Additional information about Waterloo Capital is available in its current disclosure documents, Form ADV, Form ADV Part 2A Brochure, and Client Relationship Summary report which are accessible online via the SEC's Investment Adviser Public Disclosure (IAPD) database at www.adviserinfo.sec.gov, using SEC # 133705. Waterloo Capital is neither an attorney nor an accountant, and no portion of this content should be interpreted as legal, accounting or tax advice.
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