A week that began with hope ended with a reminder that geopolitics rarely moves in a straight line. The US and Iran signed a memorandum of understanding in Switzerland on Friday, formally opening a 60-day ceasefire and lifting the naval blockade on the Strait of Hormuz. Brent crude slumped almost 7% over the week to just above US$80 a barrel, the lowest in three months, while the Dow closed at an all-time high midweek. By Sunday, however, fresh Israeli strikes on Hezbollah, Iranian threats to re-close the Strait, and pointed comments from President Trump had markets reaching for the seatbelts again.

The Fed has changed tone. Kevin Warsh's first FOMC meeting was a study in brevity, a 131-word statement (down from 341), a 12-0 hold, the easing bias dropped, and a much shorter press conference. Nine of eighteen Fed officials now see at least one hike in 2026, and the median core PCE forecast was lifted from 2.7% to 3.3%. Warsh himself declined to submit a dot. US two-year yields jumped 16bp on the day, and markets now fully price a Fed hike by October. The new chair told markets, in effect, to do their own homework, expect more volatility as forward guidance fades.

The RBA is at the end of its cycle, even if it won't say so. The board held unanimously at last week's meeting with a still-hawkish statement, noting capacity pressures and inflation persistence. The market disagrees: about a 50/50 chance of one more hike is still priced for the back half of the year. Wednesday's May CPI print (headline expected 4.3%, trim mean 3.5%) and Thursday's labour force data will be the next test. The Aussie dollar has been a bit on the back foot recently but held its ground at 70.1c, the only G10 currency to gain on the USD this week, supported by the highest G10 policy rate and historically low FX volatility.

The Bank of Japan lifted to 1% (its fifth hike), the Bank of England held at 3.75% with two dissenters wanting hikes, and UK CPI came in below consensus at 2.8%. In British politics, Andy Burnham won the Makerfield by-election and Keir Starmer is widely expected to step aside within days — gilt yields rose 8.5bp Friday in response. Chinese data was weak again: retail sales contracted year-on-year for the first time in years; growth remains reliant on exports. This chimes ominously with the discussion we had last week with Andrew Hunt, who now believes that China is being forced into a profit maximising phase that ultimately means they will start exporting inflation rather than disinflation.  

Beneath the macro headlines, the AI capex cycle continues to drive both earnings revisions and bubble talk. SpaceX briefly overtook Microsoft this week on roughly US$20bn of revenue. As we explore in this week's WWAWO, two fictional sparring partners, Cassandra Wilde, a disruptive-innovation optimist, and Gerald Granthwaite, a valuation sceptic, debate whether mid-2026's US market is a boom or a bubble. Wilde argues that the collapsing unit cost of machine intelligence has broken the old multiples and that the real risk is selling the compounders to avoid the wobble. Granthwaite points to a Shiller P/E above 40, the top five names at roughly 30% of the S&P 500, and capex increasingly financed by private credit rather than operating cash flow. Both concede the technology is durable; the fight is about the price tag and the horizon, for now we are sitting on the fence but there is a good chance that this becomes the investing question of our times. The investing implications may also be very different for younger accumulators or older investors potentially exposed to sequencing risk.  

What this means: Oil is doing the disinflation work central banks need, but the Fed is not signalling cuts. Keep duration risk modest at the long end. The RBA hold is supportive of Australian quality income. With US equity concentration at extremes and offshore politics volatile, this is a sensible moment to review international diversification and reaffirm long-term plans with clients. The next fortnight of Australian data will tell us whether the RBA’s "tightening bias" is real or just for show which will be of more than passing interest to home owners and resi investors alike.