In Appreciation of Juneteenth, Reading Trump's Iran Statement, a Fed Already on Vacation

Anyone who checked in on U.S. equity index futures markets at some point during the Juneteenth market holiday was probably a little surprised at how weak those markets were. There was definitely a "risk-off" vibe on Thursday, a day where U.S. stock and bond markets were closed. Fast forward a few hours, and voila! S&P futures are trading lower than fair value relative to Wednesday closing prices for the index, but just marginally so. The large losses visible on Thursday morning have largely dissipated.

Now, my guess is that most readers, though I truly try to express as little political opinion as possible, have figured out that I largely have conservative-leaning views on a number of issues, though I consider myself part of the middle. That is neither here nor there. My view is that the "Juneteenth" holiday might be the most important secular holiday on the federal calendar. The "Juneteenth" nickname refers to June 19, 1865, when Union Army forces under Major General Gordon Granger ordered the final enforcement of the Emancipation Proclamation.

This event took place in Texas, essentially freeing the last "legal" slaves, though "legal" is probably not the correct term, 900 days after Pres. Abraham Lincoln's Emancipation Proclamation went into effect (freeing the slaves in states that were in rebellion) and 71 days after the surrender of Robert E. Lee's Army of Northern Virginia to Ulysses S. Grant at Appomattox Court House. Obviously, local enforcement of Lincoln's Proclamation was dependent upon the advance of the Union Army and some slaves were freed well ahead of others.

I ask, as an American, as a Marine veteran, and as a veteran of both a historically "colored" National Guard unit that covered themselves in glory in World War I (The Harlem Hellfighters), and a National Guard unit that had served as part of the Army of the Potomac's famed "Irish Brigade" in the Civil War (The Fighting 69th or simply The Fighting Irish), is there a better reason for a national holiday? Is there a better reason to celebrate than the enforcement of the freedom of the last ever "legally" held slaves in the history of our nation?

"We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness."

- Declaration of Independence, July 4, 1776

This one sentence really says everything. An imperfect people with an imperfect history, and almost certainly an imperfect future. Yet, a perfect ideal to try to live up to. A perfect goal. God bless America, gang. Notice that flag that you'll see flying from your local flagpole today. That flag represents the ideal. That flag is the flag that led the charge for and paid the bloody price of freedom. That flag, that beautiful flag continues to wave, and represents the land of the free, because of the brave. Old Glory. For real.

Two Minutes to Midnight?

On Thursday, White House spokesperson Karoline Leavitt dictated a message from Pres. Trump to the media. She said, "Based on the fact that there's a substantial chance of negotiations that may or may not take place with Iran in the near future, I will make my decision whether or not to go (strike Iran's nuclear capabilities) within the next two weeks." This is largely the "why" behind the market's rally off of Thursday's lows across equity index futures markets.

There had been almost constant speculation across the media that the U.S. was preparing for such a strike. Leavitt, during her press conference, even added that the president's statement was in response to this widespread speculation. Leavitt also said, "If there's a chance for diplomacy, the president is always going to grab it."

While it is true that this president, through four-plus years of leadership, has proven to be a president that prioritizes peace much more so than probably any other president in my lifetime, it is also true that if I knew that I was going to punch you in the mouth in the next few minutes, I would probably act like I had no interest in fighting. Until I thought you relaxed your guard. That's just me, but the thought has crossed my mind. What do we know?

- We know that the U.S. has strengthened its naval forces, naval air forces, and aerial refueling capabilities in the region over the past week. We also know that certain U.S. military installations that would be easier for Iran to strike at, have nearly been evacuated. We also know that even more military hardware is on the way.

- Iranian Supreme Leader, the Ayatollah Ali Khamenei has said repeatedly that his nation would not surrender and has warned the U.S. against offensive involvement.

- Israeli Prime Minister Benjamin Netanyahu has remained steadfast in what he sees as Israel's mission, despite the fact that Iran continues to primarily strike population centers inside Israel.

- U.K. Prime Minister Keir Starmer has asked Pres. Trump to refrain from military action for now, due to concerns that such a strike could negatively impact not just the region involved, but beyond said region.

The Fed

I'd say that despite the expected policy result that came out of Wednesday's FOMC policy decision, that markets were genuinely disappointed in the Fed. The official statement released was very close to as lazy a "cut and paste" job as we have ever seen. I mean, to be honest, these statements are often "cut and paste" jobs, but this one really took the cake. Talk about a lack of effort. Gee whiz.

If this was Economics 101, that paper probably would not get a "D." One change was that "The unemployment rate remains low", which was a minor upgrade from "The unemployment rate has stabilized." Another change, which was a clear upgrade, was "Uncertainty about the economic outlook has diminished" which replaced "Uncertainty about the economic outlook has increased further."

Easy peasy, right? Sounds like the economy is in the right place to reduce short-term rates and ease the portion of the federal budget that must be set aside to service the mountain of short-term debt the government has been funding itself off of and deal with the fiscal mess left by the post-Covid-era fiscal largess of our legislative branch of government from 2020 through 2024. Not so fast, my friends.

The Federal Open Market Committee, in its economic projections, took its median forecast for 2025 gross domestic product down to growth of 1.4% from growth of 1.7% three months ago. Hmm, that's not good, but it does reinforce the case for dovish monetary policy, correct? Again, not so fast, my friends. The FOMC also sees unemployment rising to 4.5% by year's end (up from a view for 4.4% and May's 4.2%. The FOMC also sees 2025 PCE inflation at growth of 3% and 2025 Core PCE inflation at growth of 3.1%. These views are up from expectations for 2.7% and 2.8% three months ago and up from April's 2.1% and 2.5%, respectively.

A period of mild stagflation? The Fed apparently seems to think so. Fed Chair Powell thinks the economy is in a good place, despite the fact that recent data has been tough to look at and these forecasts don't express that kind of optimism. Despite the ample, justifiable cause for a quarter- to a half-percentage point reduction to be made to the target range for Fed Funds Rate, this Fed projects taking the rest of the year to make those cuts.

It is very interesting that under Powell, when the Fed was supposedly, "data-dependent," the committee aggressively cut rates ahead of last year's election when that move was not supported by the data, and now that such action is clearly supported by the data, data-dependency is no longer a consideration. I have at times supported Powell in the past, and I understood the transitory inflation call, because I made that call myself, as well.

That said, though, head-and-shoulders above his two predecessors in both short to medium clarity (even if I don't agree with the direction), and competence (my opinion), the lack of consistency in when and how to set or use criteria in the decision-making process probably disqualifies this Fed Chair for consideration as one of the greats. Of course, I had met and spoken with Paul Volcker and quite honestly, was in awe of the man. I probably am biased and continue to look for greatness in a place where greatness is simply rare.

Toil and Trouble: Triple Witching

Readers should be fully cognizant that today is June's version of "Triple Witching" (formerly known as Quadruple Witching) expirations Friday. Contracts tied to more than $6 trillion in equities, ETFs, and equity indexes are due to expire this day, which we are told, may be the largest expiration event on record.

Look for extremely high trading volume on the bells today, especially the closing bell as the S&P 400, 500 and 600 indexes will simultaneously go through their quarterly rebalancing. There could also be a risk-off aspect to the close if the prospects for peace take any more hits between now and that closing bell. Monday, by the way, is historically a quiet day coming off of the triple witching. That said, this is a headlines-driven market for now.

Economics (All Times Eastern)

08:30 - Philadelphia Fed Manufacturing Index (Jun): Expecting -0.9, Last -4.0.

08:30 - CB Leading Indicators (May): Expecting -0.1% m/m, Last -1.0% m/m.

1:00 p.m. - Baker Hughes Total Rig Count (Weekly): Last 555.

1:00 - Baker Hughes Oil Rig Count (Weekly): Last 439.

The Fed (All Times Eastern)

No public appearances scheduled.

Today's Earnings Highlights (Consensus EPS Expectations)

Before the Open: ACN (3.32), KMX (1.20), DRI (2.94), KR (1.46)

At the time of publication, Guilfoyle had no position in any security mentioned.