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Hi everyone, I’m David Jones, Senior Investment Strategist, and welcome to this Macro Minute.
 
As expected, the Fed kept rates unchanged and emphasized a data-dependent, wait-and-see approach. Chair Powell acknowledged the key tension facing policymakers right now: higher energy prices could lift headline inflation and while tariffs are still expected to be a one-time shock, they may continue to keep goods inflation elevated over the near-term, even as the labor market shows signs of gradually cooling. We expect the Fed may cut rates at least once this year amid this backdrop.
 
For investors, that means the Fed is not in a hurry to cut rates. Policy is normalizing, but the Fed retains the ability to ease if growth slows more materially.
 
Turning to markets more broadly, geopolitics and energy have been the dominant drivers of volatility in recent weeks. Oil prices have moved sharply higher, approaching $100 per barrel, as the conflict between the U.S. and Iran disrupts flows through the Strait of Hormuz, one of the most important energy shipping lanes globally.
 
The key variable here is duration. If disruptions are short lived, the impact is likely contained to market volatility. If they persist for months, higher energy prices could begin to influence both inflation and growth expectations.
 
Despite these developments, it’s notable that equity markets have remained relatively resilient. The S&P 500 is only modestly below its highs, although beneath the surface we’ve seen meaningful rotation across sectors and regions as higher oil prices, rising bond yields, and a stronger U.S. dollar tighten financial conditions.
 
From a portfolio perspective, we continue to emphasize diversification and selectivity. While higher energy prices may push headline inflation higher in the near term, the U.S. economy remains relatively resilient, supported by steady earnings growth and a low hire, low fire labor market.
 
That’s why we believe investors should remain focused on structural growth opportunities, particularly in areas tied to technology and AI investment, where earnings momentum remains strong. At the same time, maintaining diversified portfolios and careful security selection will be critical as markets navigate periods of geopolitical volatility and shifting macro expectations.
 
Thanks for watching. Head over to BlackRock.com’s Inside the Market Page for more.

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