Daily Market Analysis: Warsh’s First Fed Decision Reshapes the Market Narrative
Main Focus
Two developments pushed markets into a new regime on Wednesday.
First, Kevin Warsh’s first FOMC decision marked a hawkish shift. The Fed kept rates unchanged at 3.50%–3.75%, in line with expectations, but the updated projections moved the median 2026 year-end rate up from 3.4% to 3.8%, implying one rate hike above the current upper bound this year. Nine of the 18 members projected a rate above the current range. The projections for 2027 and 2028 also moved higher, to 3.6% and 3.4%, respectively, both above the previous guidance. Inflation forecasts were revised sharply upward: year-end 2026 PCE was raised to 3.6%, and core PCE to 3.3%, compared with 2.7% in the March projections. Warsh declined to add his own estimate to the dot plot, saying it was “not useful in the implementation of policy.” The policy statement was also shortened significantly, from more than 300 words to around 130, with all forward guidance removed. Warsh said, “We still have work to do on price stability.” According to Bespoke, this was the worst first-day S&P 500 performance for a new Fed chair since 1994: the S&P fell 1.21%, the Dow 0.98%, and the Nasdaq 1.34%. All 11 GICS sectors closed lower; Communication Services led the losses at -2.98%, while Industrials fell the least, down 0.12%. Moderna rose 11.6% and was the day’s top performer, while Carvana fell 10.3%, the largest decline.
Second, President Trump and Iranian President Pezeshkian digitally signed the MoU in Versailles on Wednesday evening. Vice President Vance and Iranian Parliament Speaker Ghalibaf had already signed it three days earlier, but Trump’s signature completed the diplomatic process. The signing took place before a dinner with Macron, who congratulated both sides and said, “Bravo, very good, excellent.” In a post on X, Macron said: “This agreement opens the way to lasting peace and allows the reopening of the Strait of Hormuz. It is an important step in the right direction for our citizens and should help bring energy prices down soon.” Trump’s joke during the press conference — “If it does not work, I will blame Vance” — was notable but also reflected lingering concern about the deal’s fragility. He also warned that if Iran violates the agreement, the US “would not hesitate to bomb again.” Republican Senator Bill Cassidy called the MoU “the worst foreign policy mistake in decades.” Senator Thom Tillis added: “$100 billion was spent, two F-18s were lost, 13 people were killed, 365 wounded, and 14 points are not enough.” Asian markets were mixed this morning, but the Kospi and Nikkei reached historic highs: the Kospi moved above 9,000 for the first time, led by SK Hynix (+3.45% to a new all-time high) and Samsung (+1.23%), while the Nikkei rose above 71,000 for the first time (+1.79%). US futures are higher, with the S&P up 0.83%, the Nasdaq 1.32%, and the Dow 282 points, or 0.5%.
Macro Framework
Hawkish FOMC Shift: The Warsh Regime Begins
Warsh’s first decision clearly signaled a regime shift. He announced five task forces focused on communication, balance sheet management, data use, productivity and employment, and the inflation-targeting framework. He said the Fed would review its communication practices by year-end, including press conferences, the dot plot, meeting schedules, transcripts, and minutes. The shortening of the policy statement was symbolic: he described it as “a bit shorter, a bit simpler, removing legacy language.” Economic activity was described in minimal terms as “expanding at a solid pace,” and all forward guidance was removed. The statement did not disclose how members voted; it only noted that the decision was unanimous. Ella Gude of BNY Investments Newton said: “Less forward guidance gives the Fed more optionality, but it also means more volatility in how markets price the rate path.” This structural shift is likely to raise volatility in the short term while redefining central bank communication norms over the medium term. An important technical point is that Fed funds futures had priced a 98% probability of no change the previous day; the current pricing now shows a meaningful probability of a rate hike as late as October. Jeffrey Gundlach of DoubleLine Capital said: “Warsh is clearly saying he intends to deliver price stability. That means the easy-money policy many expected in Q1 is not coming.”
Iran MoU: Details Are Emerging
The agreement, officially called the “Islamabad MoU,” consists of 14 articles.
Article 1 calls for the immediate and permanent cessation of military operations on all fronts, including Lebanon, and for both sides to refrain from the use or threat of force, while affirming Lebanon’s territorial integrity and sovereignty.
Article 3 states that the final deal must be completed within 60 days, although that period can be extended by mutual consent.
Article 4 says the US will begin lifting the naval blockade immediately upon signing, with full removal within 30 days, and that US forces will withdraw from the vicinity of Iran within 30 days after the final agreement.
Article 5 allows Iranian commercial vessels to transit freely from the Persian Gulf to the Arabian Sea for 60 days, with mine-clearing operations to be completed within 30 days.
Article 6 commits the US and its regional partners to develop at least a $300 billion Iranian reconstruction and economic development plan.
Article 7 states that the US commits to ending UN Security Council decisions, IAEA Board decisions, and all unilateral US sanctions, both primary and secondary.
Article 8 confirms that Iran will not acquire or develop nuclear weapons and that enriched material stockpiles will be handled through “in-place down-blending” under IAEA supervision.
Article 10 says the US Treasury will issue waivers immediately after signing to allow exports of Iranian crude oil, petroleum products, and derivatives, including banking, insurance, and shipping.
Article 11 provides for the release of Iran’s frozen or restricted funds and assets.
Article 14 states that the final agreement will be endorsed by a binding UN Security Council resolution.
One senior official said no emergency material recovery was needed because “Midnight Hammer was successful, and the material is buried too deeply.” That statement weakens Trump’s original war justification, implying that the summer 2025 strikes may already have significantly degraded Iran’s nuclear program.
IEA Warning on Oil Oversupply: A “Major Overhang” by 2027
The International Energy Agency issued a notable warning: if the Iran-US agreement becomes durable, there could be a “significant overhang” in oil markets by 2027. Global supply is expected to average 102.4 million barrels per day in 2026 and rise to 110.3 million barrels per day in 2027. That points to structural downside pressure. In the short term, oil continues to fall: Brent is at $78.65, marking the fourth consecutive session below $80 for the first time since March, while WTI is at $75.82. New York Life Investment Management cautioned that lower oil reduces the likelihood of an inflation problem, but this is not yet an “all clear” signal, since oil is still above pre-conflict levels, shipping normalization will take time, and inventories and strategic reserves still need to be replenished. A key question now is how Saudi Arabia and OPEC will respond. For now, the message remains centered on production discipline, but if the price erosion continues, a policy shift in Q3–Q4 becomes increasingly likely.
Trump’s New Focus: Russia-Ukraine and AI Standards
After securing the Iran agreement, Trump shifted attention to other diplomatic targets. At the G7, he said that “Moscow must make a deal” to end the Russia-Ukraine war and promised additional support for Kyiv. That introduces a new geopolitical positioning issue, and any renewed discussion around Russian energy exports could further complicate the medium-term oil supply picture. At the same time, a closed-door AI meeting was held during the G7 summit. Anthropic CEO Dario Amodei and Google DeepMind CEO Demis Hassabis argued that an American-led coalition should set global AI rules and standards. The meeting included Trump and a number of state and technology leaders. Symbolically, this suggests that the AI race has fully moved to the nation-state level, a notable development ahead of Anthropic’s potential fall IPO. Amazon AI executive Peter DeSantis estimated that the first commercially useful quantum computers could arrive within five to seven years, with AI and quantum computing together opening a new era in computing.
Asia at Record Highs: Kospi Above 9,000, Nikkei Above 71,000
Asian markets broke historic levels this morning. The Kospi moved above 9,000 for the first time, with index heavyweight SK Hynix rising 3.45% to a new all-time high and Samsung up 1.23%. SK Hynix said it had begun shipping samples of HBM4E, its next-generation memory chip, to key customers, with Nvidia understood to be a major client. The new product offers 16 Gbps per pin and more than 20% improvement in power efficiency. The Nikkei rose 1.79% to break above 71,000 for the first time. The combination of the Iran agreement, post-Fed global positioning, and gains in the AI supply chain drove the move. Elsewhere in Asia, the ASX fell 0.29%, the Hang Seng lost 0.76%, and China’s CSI 300 was slightly lower. A related development is that Wall Street banks and foreign borrowers are increasingly turning to China’s low-cost funding markets. Panda bond issuance has risen sharply this year, with names including Deutsche Bank, Morgan Stanley, Volkswagen, Henkel, Kazakhstan, and Pakistan. The interest-rate gap between China and the West is making the yuan an increasingly attractive funding currency.
Crypto
Bitcoin is trading around $63,900 this morning, down roughly 3% on the day but still up about 2% on the week, reflecting the rebound from Friday. The latest decline was triggered by the Fed: the hawkish dot plot surprised the market, with half the members signaling a rate above the current range by end-2026. That creates structural pressure for crypto, as most portfolio managers still treat Bitcoin as a high-volatility asset closely tied to rate expectations. Gerry O’Shea of Hashdex said: “Without a major catalyst, we expect BTC to trade in the $60,000–$70,000 range over the coming weeks. The catalysts that could break this range are the passage of the CLARITY Act or a renewed escalation between the US and Iran.” Altcoins also sold off broadly: ETH at $1,733 (-3.4%), XRP at $1.17 (-3.9%), SOL at $71 (-3.6%), and DOGE down 1.79%. HYPE fell 7.2% but remains up 28% over the past week. Tron was the only major token in positive territory, up 0.9%.
Kraken Chief Economist Thomas Perfumo highlighted a structural positive signal: BTC is trading near its 200-week moving average at $62,358. Over the last two weeks, Bitcoin briefly fell below this level twice but closed the week above it. According to Perfumo, closes below the 200-week average have been rare, occurring in only about 10% of trading days since July 2017, and historically these periods have marked highly attractive entry points for buyers. The historical performance is notable: buyers at this level have seen returns of 113% over one year and 313% over two years, with a median break-even period of just two days and a maximum drawdown of only 9% over the following year. He added that “at these levels, Bitcoin has historically tended to offer significant value,” while also noting that past performance is not a guarantee of future returns. This signal is consistent with CryptoQuant’s Sharpe ratio analysis, where readings near -20 have historically marked cycle lows in 2015, 2018–19, and 2022–23. Some analysts remain more cautious, however. The $63,200–$63,300 area is viewed as the key weekly support. A close below $63,400 could trigger algorithmic hedging shorts. The liquidation map shows heavy long liquidation risk below $60,000, with the largest cluster sitting below $50,000. The long liquidation ratio has also flipped higher, suggesting traders may be entering long positions too early and creating fuel for larger players. The $61,000–$63,200 zone remains the key area to watch.
Structurally positive signals include:
(1) wallets that are accumulating BTC purchased 125,000 BTC in the first half of June, according to CryptoQuant;
(2) exchange reserves have fallen by roughly 80,000 BTC since February, to 2.71 million;
(3) whales withdrew more than 11,000 BTC from exchanges in the past 24 hours;
(4) the 200-week SMA continues to act as a historical bottom signal;
(5) the Sharpe ratio near -20 is still consistent with prior cycle-bottom conditions, although those were followed by three to five months of basing rather than an immediate rebound.
Negative factors remain clear:
(1) the Fed’s hawkish turn and tighter liquidity outlook;
(2) cumulative ETF outflows exceeding $5.7 billion since May;
(3) the drying up of Digital Asset Treasury buying, as highlighted by AVAT’s 38% debut decline;
(4) the lasting psychological impact of Saylor’s 32 BTC sale, which weakened the “infinite buyer” narrative.
O’Shea’s broader conclusion is that investor attention has been pulled toward IPOs and AI equities, but that capital could rotate back into crypto over time as institutional interest grows and regulation becomes more clearly defined. In other words, the short-term range remains $60,000–$70,000, while the medium-term direction depends on the CLARITY Act and the broader macro regime.
Commodities
Oil continues to decline, with Brent at $78.65 (-1.13% daily) and WTI at $75.82 (-1.26%). Brent has now traded below $80 for four consecutive sessions for the first time since March. The structural downside pressure still comes from three channels:
(1) the gradual return of Iranian supply, with Treasury waivers expected after Friday;
(2) the IEA’s projection of a significant oversupply in 2027;
(3) weak Chinese demand, with May retail sales down 0.6%, the first negative reading since December 2022.
That said, Trump’s warning that the US would not hesitate to bomb again if the agreement is violated remains a source of volatility. If the deal collapses, market positioning still allows for a rapid move back above $90 after a 15% three-day drop. New York Life Investment Management noted that lower oil reduces inflation risks, but does not yet provide a full all-clear signal. The structural direction points toward a $75–$80 range, with a possible test below $70 if Hormuz fully normalizes, although that would also give the US, Saudi Arabia, and OPEC more time to manage supply discipline.
The picture in precious metals is mixed after the hawkish Fed shift. Gold is around $4,329, slightly lower on the day but still positive on the week. Silver is at $68.87, also softer on the day but still above its 200-day EMA of $67.60, keeping the broader structure intact. Palladium paused after a sharp rally, trading near $1,335. If incoming data over the next few weeks, such as retail sales, the Philadelphia Fed index, and jobless claims, come in weak, the Fed’s hawkish stance may be reassessed, reopening a more constructive path for metals.
Copper is trading near $6.40. It pulled back after the Fed, but remains positive on the week. The structural demand story tied to AI infrastructure continues to strengthen, supported by Nvidia’s planned $20 billion bond issue, Oracle’s borrowing, SpaceX’s $85.7 billion raise, HSBC’s multi-year AI partnership with Google Cloud, and SK Hynix’s HBM4E shipments. Cocoa is at $4,144, up 10.3% on the week; coffee is at $277.85, up 11.86%; and wheat is at $622.25, up 6.05% on the week. Wheat has moved back above 600, breaking a key structural resistance level. All three are trading with RSI readings in the 57–58 range, suggesting healthy momentum rather than overbought conditions.
Equities
Wednesday’s Wall Street session was historically weak: the S&P 500 fell 1.21%, the Dow 0.98%, and the Nasdaq 1.34%. It was the worst Fed Day for a new chair since 1994. All 11 GICS sectors closed in the red, with Communication Services down 2.98%, Consumer Discretionary down 2.69%, and Real Estate down 2.47%. Industrials were the least negative, falling just 0.12%. Moderna rose 11.6%, while Carvana lost 10.3%. Among the major names, Meta fell 5.44%, Microsoft 3.79%, Amazon 3.46%, Tesla 2.05%, and Nvidia 1.33%. There were some areas of resilience: AMD rose 1.02%, ASML gained 3.54%, and TSMC added 1.48%, leaving the semiconductor space mixed rather than uniformly weak.
US futures are higher this morning, with the S&P up 0.83%, the Nasdaq up 1.32%, and the Dow up 0.5%. The combination of Asian record highs, the Trump-Pezeshkian signing, and the IEA oil outlook is supportive for a risk-on opening in US markets. Today’s focus will include earnings from Accenture and Kroger, along with the May Philadelphia Fed Index and weekly jobless claims. Elon Musk also appointed Roelof Botha to the SpaceX board as an independent director and audit committee member, bringing the board to eight members. Momentum around SPCX remains firmly positive. US markets will be closed tomorrow for the Juneteenth holiday.
Week Ahead
Date | Day | Event
June 18 | Thursday | Accenture and Kroger earnings | Philadelphia Fed Index | Weekly jobless claims
June 19 | Friday | US markets closed for Juneteenth
June 19 | Friday | Official full reopening of the Strait of Hormuz | US naval blockade lifted
Fall | Q3–Q4 | Anthropic IPO | Possible OpenAI listing | CLARITY Act pricing implications