Unadorned Notes: June 19-23, 2025
U.S. Strikes Iranian Nuclear Sites; U.S.-China Tech Rift Deepens; U.S. Leading Economic Index Declines; Markets Rotate Toward Defensives; U.S. Energy Resilience Strengthens
U.S. Politics, Policies, and Geopolitics
U.S. Strikes Iranian Nuclear Sites: The U.S. conducted airstrikes on three Iranian nuclear facilities (Fordow, Natanz, Isfahan) over the weekend, marking the first direct U.S. attack on Iran’s nuclear infrastructure (multiple sources, 2025-06-22/23). Iran’s immediate response was a limited missile attack on U.S. bases in Qatar and Iraq, with advance warning and no casualties (WSJ, Bloomberg, 2025-06-23). Oil futures spiked >6% on initial news but reversed sharply (-7.2%) after Iran’s retaliation avoided critical energy infrastructure; S&P 500 and Nasdaq rose ~1% (WSJ, 2025-06-23). The market is discounting further escalation risk, but the regime shift to direct U.S.-Iran kinetic exchange is confirmed. The risk of a Strait of Hormuz closure remains a tail event, with Iran’s parliament voting for closure but no executive action (Nikkei, The Hindu, 2025-06-23).
QZ’s Comment: I am combining multiple news items into one to improve the signal-to-noise ratio. I am also including more inline citations in lieu of outlinks.
Trump Expands Executive Authority: The Supreme Court ruled 6-3 to allow the Trump administration to deport migrants to third countries without 10-day notice, removing a key procedural barrier to mass deportations (WSJ, 2025-06-23). President Donald Trump granted a third 90-day extension to TikTok’s divestiture deadline, potentially exceeding statutory authority (Sinocism, Politico, 2025-06-19/23). The move underscores continued use of executive discretion in regulating foreign-owned tech platforms. Both developments reflect an assertive regulatory approach with implications for labor supply, digital policy, and sectoral investment risk.
Strains Mount on U.S. Systems: The U.S. Bureau of Labor Statistics is reducing CPI sample sizes due to budget constraints, raising volatility and uncertainty in inflation measurement (Chartbook, 2025-06-20). Social Security’s trust fund is now projected to run out in 2033, nine months sooner than previously forecast, with incoming payroll taxes covering only 77% of promised benefits thereafter (Barron’s, 2025-06-22). U.S. and China both face youth unemployment and demographic headwinds, with China’s urbanization and labor market adjustment ongoing.
U.S.-China Tech Rift Deepens: U.S. officials are considering revoking waivers for Samsung, SK Hynix, and TSMC to supply advanced chip equipment to China, raising the risk of further supply chain decoupling (WSJ, 2025-06-20). Chinese automakers are targeting 100% domestic chip content by 2027, and the Synopsys–Ansys merger faces delays from China’s antitrust regulator (Nikkei, 2025-06-19/21). U.S. tech sector is investing heavily in nuclear and AI infrastructure, with Nvidia, Amazon, and Alphabet leading.
China Tightens Resource Leverage: China’s rare earth export controls are now the top agenda item for the July EU-China summit; EU firms report only partial license processing and ongoing customs delays (Reuters, 2025-06-20). Chinese automakers are accelerating the use of 100% domestic chips by 2027, with state direction, as U.S./EU tariffs on EVs and auto parts escalate (Nikkei, 2025-06-19/21). China’s export controls on antimony and rare earths are causing acute supply chain stress in global battery and auto sectors, with spot antimony prices >$60,000/ton (Reuters, 2025-06-20).
China Expands Nuclear Arsenal: China is adding ~100 nuclear warheads per year, reaching at least 600 in 2025, with 350 new ICBM silos under construction and MIRV deployment underway (SIPRI, China Business Spotlight, 2025-06-20/21). This is a regime-level shift in global nuclear balance, with direct implications for U.S. and Russian strategic planning and for regional security in East Asia.
Economics, Finance, and Business
U.S. Leading Economic Index Declines: The Conference Board’s Leading Economic Index (LEI) fell 0.1% to 99.0 in May 2025, marking the sixth consecutive monthly decline and triggering a recession signal. April’s drop was revised to a 1.4% decline, the steepest since early 2020. Weaker consumer sentiment, reduced manufacturing orders, higher jobless claims, and fewer building permits contributed to the decline. A rebound in equity markets provided some support, but was outweighed by broader negative indicators. Despite the signal, the Conference Board projects U.S. GDP growth to slow to 1.6% in 2025, with further deceleration possible in 2026 due to ongoing tariff impacts.1
U.S. Inflation Pressures Mount: U.S. business activity moderated slightly in June 2025, with S&P Global’s Composite PMI slipping to 52.8 from 53.0 in May, signaling continued but slowing growth. Tariff-driven cost increases pushed manufacturing input prices to their highest levels since mid-2022, with over half of firms linking rising prices to import duties. Inflation pressures have intensified after earlier lags due to firms exhausting pre-tariff inventories. The Federal Reserve held interest rates steady, citing expectations of sustained inflation, while noting increased geopolitical risks and tariff uncertainty. Employment edged up, primarily in manufacturing, though overall business sentiment remained subdued compared to pre-2025 levels.2
Fed Signals Divided Path Forward: The FOMC held rates at 4.25–4.5% for the fourth consecutive meeting (St. Louis Fed, 2025-06-23). The dot plot reveals a split: 7 officials see no cuts in 2025, 8 expect two cuts. Fed Governor Waller and Vice Chair Bowman publicly advocate for a July rate cut, downplaying tariff-driven inflation as “likely to be temporary” (Axios, 2025-06-23). The Fed’s 2025 core PCE inflation forecast was revised up to 3.1% (from 2.8%), explicitly citing tariff pass-through, but recent CPI/PCE prints remain benign. Market-implied probability of a September cut is rising; the Fed’s “data dependency” is now explicitly tied to tariff and oil price transmission.
Mixed Signals in Key U.S. Sectors: May 2025 existing home sales rose 0.8% MoM to 4.03m SAAR, but remain at the lowest May pace since 2009; housing starts fell 9.8% to 1.26m SAAR, and NAHB index dropped to 32 (Bloomberg, 2025-06-23). May 2025 retail sales fell 0.9% MoM, driven by a post-tariff auto sales drop, but control group sales rebounded 0.4%. Regional Fed manufacturing surveys diverged, with Empire State expectations up (21.2 from -2) and Philly Fed expectations down (18.3 from 47.2).
Markets Rotate Toward Defensives: Institutional flows show a pronounced shift toward defensive sectors (financials, insurance) and away from tech, with Palantir and Nvidia remaining outliers due to defense/AI narratives (VolumeLeaders, 2025-06-23). M&A activity is concentrated in financial services (BNY Mellon–Northern Trust) and construction materials (Home Depot–GMS, QXO), with block trades and ETF flows indicating risk rotation. Healthcare and communication services underperformed on regulatory and earnings risk.
U.S. Energy Resilience Strengthens: Oil prices remain highly sensitive to Middle East escalation, with Brent spiking above $81/bbl before retracing. U.S. shale/fracking capacity and net energy exporter status have structurally reduced U.S. vulnerability to Middle East supply shocks (WSJ, 2025-06-23). Tech sector investment in nuclear (Nvidia, TerraPower, Oklo) is accelerating, with new U.S. nuclear plant construction announced in New York (Bloomberg, 2025-06-23).
India Faces Trade, Oil Risks: India is negotiating a Trump tariff deal with a July 9 deadline, with $200bn/year in trade at stake (Nikkei, 2025-06-19/22). The government reports sufficient oil reserves and diversified supply routes amid Strait of Hormuz risk, but freight costs for exporters have risen 30–40% due to Red Sea and Gulf disruptions (NDTV, 2025-06-23). Nifty futures show elevated open interest and FII positioning (>50%), with July expected to be highly volatile due to overlapping geopolitical and trade events.
China Auto Sector Faces Crisis: China’s auto sector faces a potential “Evergrande moment” as overcapacity, price wars, and delayed supplier payments (127+ days at BYD/Geely) threaten systemic stability; 3.5m unsold cars in inventory, and debt ratios at NIO/SAIC >87% (China Business Spotlight, 2025-06-19/21). Consumer deflation persists, with May CPI at -0.1% and property prices down 3.5% YoY. Local trade-in subsidies are being suspended as funds run out, risking further demand contraction.