Stocks closed mixed on Friday, but mostly higher for the week.

Concerns over the possible U.S. involvement in the Israel/Iran conflict weighed on shares going into the weekend.

On Saturday, that question was answered as the U.S. struck Iran's nuclear facilities.

Of course, a new question has taken its place, and that is, what happens now? What will retaliation by Iran, whose nuclear program has largely been destroyed, as well as much of their ballistic program, look like?

Following Saturday's strike, they launched more missiles at Israel. But the U.S. has warned Iran from retaliating against the U.S., and its allies, or else face additional strikes on Iran's other targets.

There will likely be more volatility in the market. But absent larger escalation from Iran or additional involvement from the U.S., the market should get back to focusing on the economy, earnings and interest rates.

Last Wednesday, the FOMC meeting concluded with the Fed leaving interest rates unchanged for the fourth meeting in a row. But Fed Chair Jerome Powell had some supportive comments at his press conference that followed.

He said "despite elevated uncertainty, the economy is in a solid position, the unemployment rate remains low, and the labor market is at or near maximum employment."

The Fed's SEP (Summary of Economic Projections), forecasts full-year GDP at 1.4% for 2025, and 1.6% for 2026.

It was noted that the unemployment rate of 4.2% is "broadly in balance and consistent with maximum employment." While the Fed does see an increase in the unemployment rate for all of 2025 to 4.5%, that's still historically pretty low. They also see it staying at that rate for 2026 as well.

With PCE inflation at 2.3% y/y (2.6% for core, i.e., ex-food & energy), they do expect it to go up a bit for the rest of the year, putting total inflation at 3% for 2025, but back down to 2.4% for 2026, and 2.1% for 2027.

As for interest rates, the Fed Funds rate remains at a midpoint of 4.38%. But they are still expecting rates to fall to 3.9% by year's end, which indicates 2 rate cuts on the docket for this year (presumably 25 basis points each). They are also projecting rates to fall to 3.6% in 2026 (1 rate cut), and 3.4% in 2027 (1 rate cut).

On Friday, Federal Reserve Governor Christopher Waller said that he believes the Fed could begin lowering rates again as early as next month's July 29-30 meeting. But added that was his view, and he did not know "whether the committee would go along with it or not."

Nonetheless, with higher tariff-induced inflation worries, thus far, failing to materialize, that could give the Fed an opening to cut rates sooner rather than later.

Although, as it stands now, the odds of a rate cut in July are only at 10.3%. But the likelihood of a rate cut in September are more favorable at 71.8%.

But with each report showing progress on inflation continuing, that could further influence the Fed to move up their timeline for easing monetary policy.

The market will get another look at inflation on Friday, 6/27, with the Personal Consumption Expenditures (PCE) index.

In the meantime, focus will be on the Middle East conflict, and, of course, any news regarding trade deals with the U.S.

See you tomorrow,