The resumption of the conflict between the U.S. and Iran this week could have a big impact on the interest-rate environment that advisors and their clients must navigate over the coming months.
Oil prices jumped this week after Iran was accused of striking three ships in the Strait of Hormuz and the U.S. launched strikes on Iranian targets. The New York Times reports that the U.S. hit more than 170 Iranian targets during two days of strikes this week. In a post on his Truth Social network Friday Trump reiterated that the ceasefire is over, but said that Iran has asked the U.S. to continue talks, which it has agreed to do.
This week’s events could have a big influence the Fed’s interest rate policy over the coming months, according to Macquarie Group. In a note Thursday, Thierry Wizman, Global FX & Rates Strategist at Macquarie Group said that, if oil prices do not rise further ahead of next week, Fed chair Kevin Warsh will be able to dial back the Fed’s recent “hawkish tone.” In particular, he pointed to the press conference that followed June’s most recent Fed meeting, and the minutes of that meeting, which were released this week.
Brent Crude Oil Futures are up more than 5% this week, but are down almost 0.7% Friday as markets weighed the latest developments in an eventful week.
However, Wizman feels that, if oil prices spike higher again, the Fed, the European Central Bank, the Bank of England, and the Reserve Bank of Australia would feel obligated to go back to the more hawkish tone that was evident throughout June. “As for the Fed, what happens to the price of oil may determine the level of the urgency of the next rate hike - i.e., whether it comes in September or October,” he said. “We're still baselining October.”
The CME’s FedWatch tool currently shows a greater likelihood of a rate hike than interest rates staying at the current level. The latest tool data show that, with a current target rate range between 3.5% and 3.75%, the futures market is pricing in a 17.3% probability that this won’t change through the Fed’s December 2026 meeting. The probability of an increase to between 3.75% and 4% is 40.2%, and an increase of 4% to 4.25% has a probability of 31.5%.
Austin Graff, CEO and CIO of Opal Capital, told InvestmentNews that advisors have to weigh the impact of a high interest-rate Fed on equities. “A hawkish, higher-for-longer Fed under Chairman Warsh weighs disproportionately on long-duration equities, whose valuations lean heavily on the assumption of lower discount rates—a bet that now looks far less certain to pay off,” he said. “That backdrop favors a rotation into dividend-paying equities, whose value is anchored in near-term, tangible cash returns rather than speculative growth years out.”
Graff also notes that historically, more hawkish Fed regimes have coincided with investors favoring quality and profitability over speculative growth. “Dividend payers screen well on both given their free-cash-flow discipline,” he said. “It's worth noting that healthcare, utilities, and consumer staples—the traditional dividend-paying sectors—are trading at historic discounts to the market on a relative basis.”
“We expect that discount to reverse in a higher-for-longer environment,” he added.
The takeaway for the wealth management industry is twofold: advisors should watch oil prices as the near-term signal for the Fed's next move, and consider whether client portfolios are positioned for a higher-for-longer environment that increasingly favors dividend payers over long-duration growth names.
Merrill's latest hires span Colorado to Louisiana, even as industry-wide recruiting data suggests the firm is losing almost as many advisors as it gains.
The $36 million buy allegedly hid inflated books and a $50 million diversion.
“An award citing emotional distress is very unusual,” an industry executive said.
New EBRI research found workers who participated in employer financial education reported higher confidence, literacy and financial satisfaction.
Beyond operational excellence, the winning advisors of the future are the ones who can reach across multiple disciplines without discarding specialist skills.
Northern Trust’s Ken Lassner shows advisors how to convert volatility into after-tax portfolio gains
Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income