Escalation in the Middle East... How the market is reacting so far... Some signs of weakness... Still bullish on this 'chaos hedge'... The next big energy trade...
The gears of war keep turning...
We're now in the fifth day of open war between Israel and Iran, which have traded strikes back and forth again over the past 24 hours. President Donald Trump left the G7 international summit earlier than scheduled yesterday to more privately monitor what's going on.
Coming into focus is a "real end" to Iran's nuclear program, Trump told reporters on Air Force One yesterday – "not a ceasefire, an end." And he warned about more attacks to come over the next two days.
The other option? Iran "giving up entirely. That's OK, too," Trump said.
He also took to social media late yesterday to call on millions of residents to evacuate Tehran, Iran's capital.
Today, Trump continued turning up the heat. This time, he posted that "we" – as in the U.S. – "now have complete and total control of the skies over Iran" (a day after Israel said the same thing).
He wrote that the U.S. knows where Iran's "so-called 'Supreme Leader'" is and could kill him if it wanted. Then Trump demanded his "UNCONDITIONAL SURRENDER!" in another post a few minutes later.
Let's not forget or underestimate that Trump loves to "win," and Iran reportedly tried to have him assassinated at least once... so you can imagine the temptation he's feeling with Iran's current leadership seeming on the brink of defeat.
Another top target is a key underground uranium-enrichment site roughly 140 miles south of Tehran. More U.S. fighter jets moved into the area today, Reuters reported.
Meanwhile, in Ukraine, war also continues. Russian missile and drone strikes on the Ukrainian capital of Kyiv killed at least 15 people – including one American – and injured some 150 people as they slept in their homes.
Given the players and interests involved at the same time in the Middle East and Eastern Europe, it feels more and more to me (Corey McLaughlin) like a growing world war. And no clean end is in sight.
As for the impact on the market...
So far, it has shown up most in oil prices.
After a breather yesterday on hopes of "de-escalation" in the Middle East, oil prices have moved up more than 4% in the past 24 hours... starting with Trump's call for evacuating Tehran.
Brent crude, the international standard, is above $76 per barrel. And West Texas Intermediate, the U.S. benchmark, is near $75.
That's their highest prices in nearly three months, but still cheaper than they've been at times during the past few years. Higher oil prices tend to eat into the broader stock market, but they boost energy stocks. That's exactly what happened today.
The major U.S. stock indexes were down across the board – with losses (and oil-price gains) picking up in the afternoon amid Trump's social posts. The benchmark S&P 500 Index was down roughly 1%, but the energy sector of the S&P 500 gained 1%.
Today's market action also saw a less dramatic but still important contributing factor... Here in the U.S., retail spending slowed for a second straight month.
The Commerce Department reported that sales declined 0.9% in May, which was a bigger drop than Wall Street was anticipating. That followed a 0.1% decline in April, which was tied to uncertainty around tariffs. If consumer spending continues to slow, that's not a good sign for the economy.
Market bears could also point to other signs of weakness...
While the S&P 500 and tech-heavy Nasdaq Composite Index are trading near their all-time highs, the Dow Jones Industrial Average and small-cap Russell 2000 Index aren't even above their longer-term 200-day moving averages right now.
And we're seeing a small but potentially important shift in investor sentiment...
So far this year, even with all of the headlines surrounding inflation, the Federal Reserve, a near-bear market, and now geopolitical tensions, retail investors haven't been scared out of stocks.
As we noted last week, investor fear has disappeared from the market, and one sentiment indicator even showed that "greed" had returned. And on Friday, the University of Michigan's consumer sentiment survey showed a 16% jump in optimism from last month – with all five survey components rising in June.
We can also see that in folks' allocations to stocks. According to Goldman Sachs, investors hold 53% of their total assets in equities. That matches the all-time high set in the final years of the dot-com bubble.
But now that might be starting to change...
Over the past three weeks, while the broader market was in the middle of its rebound, retail investors have been selling stocks for the first time since January. Just take a look at this chart that financial writer Mike Zaccardi shared on the social platform X...
You can see that for most of the start of 2025, retail investors were loading up on stocks. That includes buying the dip during April's near bear market.
But now that stocks have almost fully recovered, with the S&P 500 just a few percentage points below its February 19 high, those inflows reversed.
Retail investors aren't the only ones selling...
We've covered insider buying and selling in previous Digests. We track this because company insiders should know the most about a company's health and operations. If they're buying up shares, it's a good sign that they have confidence in the business.
And that was true during the market sell-off. In April, the insider buy-to-sell ratio hit the highest level in two years. But, like we saw with retail investors, that all changed with markets snapping back...
According to data from The Washington Service, an insider-trading tracking firm, the ratio of buyers to sellers hit the lowest level in seven months last week:
Insider selling isn't a perfect predictor of where markets are headed. As we've written in the past, insiders can sell for a variety of reasons – like preplanned sales or for tax reasons.
Insider buying is more useful. Typically, they buy when they believe the stocks have sold off too much, or shares are undervalued (like they thought in 2022). But right now, few insiders are eagerly loading up on their stock.
What this means for the 'new bull market'...
Neither of these metrics signals imminent danger for the stock market on its own.
But without the unrelenting retail inflows the market has enjoyed in recent months, the market's momentum could flag. And if insider behavior remains bearish, it looks less and less like a coincidence.
And, as we explained yesterday, don't be surprised to see volatility over the next few weeks.
The 'chaos hedge'...
The world today has plenty of paths toward chaos. Multiple continents have active wars... tomorrow's Federal Reserve meeting could bring surprises... or something unexpected could pop up at any time.
If any of those sends fear back to the market, you'll likely want to have at least some exposure to one asset: gold.
Many of our editors call gold a "chaos" hedge. And it has been exactly that for a while now. The precious metal is up roughly 28% this year, more than 60% since the start of 2024, and about 100% since a low in late 2022. It traded today at nearly $3,400 an ounce.
A couple weeks ago, our Director of Research Matt Weinschenk made the case for $5,000 gold in a This Week on Wall Street video.
And while we've been writing about the near-term bullish case for gold for a few years now, the reasons have not expired yet.
In August 2024, we outlined the promising technical price action (new highs after a decade-plus of sideways returns), and the compelling fundamental setup for gold. I wrote...
There are at least three fundamental catalysts that support a bullish case for the centuries-old store of value...
- The threat of escalating war in the Middle East and the ongoing war between Russia and Ukraine. Simply put, more developments in these wars could lead to further "shocks" for stocks and send investors into "safe haven" assets like gold or bonds.
- It looks like the Federal Reserve is comfortable returning to "business as usual" and will lower interest rates. This isn't that long after the economy endured a 40-year-high rate of inflation (and still-rising prices). Cheaper dollars means rising prices for dollar-denominated assets... like gold.
Other central banks are also buying gold as a way to hedge against the dollar... to the tune of more than 1,000 tonnes in each of the past two years.
- Campaign promises from the U.S. presidential candidates to "fight" inflation. We've seen this story before... The proposed policies, in one way or another, will only exacerbate U.S. debt and inflation, and certainly won't get to the root of the problem: fiat currency and money printing.
Of these catalysts, Nos. 1 and 3 are actively playing out. Don't forget the "big, beautiful bill" (with increased defense spending sitting in Congress right now). Factor No. 2 could be on the way if a Jerome Powell-led Fed decides to lower interest rates sometime this year or the central bank eventually does under a new Fed chair next year.
This combination of factors is why we constantly encourage owning at least some gold in your portfolio. Here's a Digest from October 2024 when we were talking about the previous round of open warring between Iran and Israel...
The trouble in the Middle East, depending on how it develops, could also stoke inflation should it impact energy supply from major oil-producing countries and/or additional supply-chain concerns in the region.
Remember, the Houthis are still attacking freighters in the Red Sea, and Iran is home to significant oil-production facilities that could be targets of Israeli retaliatory strikes to yesterday's missile attacks from Iran.
That said, in a world where inflation is already reality – and we're willing to bet it will be in some form for our entire lifetime – you'll want to have a recipe to protect and grow your hard-earned wealth.
Here's ours: buying shares of high-quality businesses at reasonable prices... owning inflation hedges such as gold... and being ready for the inevitable next credit-related crisis, both with protection in mind and because of the risk-reward opportunities that emerge amid a panic.
Beyond owning gold itself, there's possibly more value now to be had in adding some exposure to gold-mining stocks, as our DailyWealth Trader editor Chris Igou wrote to subscribers today...
You see, during a gold boom, gold miners offer leverage to the price of gold.
That's because all of the gold those companies have in the ground goes up in value as prices climb. And gold stocks can soar much higher than the price of gold when that happens.
As Chris shared, despite the ongoing gold boom, "investors are actively getting out of gold stocks" – which presents an opportunity. He used the VanEck Gold Miners Fund (GDX), up 17% since March versus gold's 11% return in the same period, as an example...
The shares outstanding for GDX tell this story.
Thanks to GDX's structure, it can create or liquidate shares based on investor demand. When folks don't want to own gold stocks, the share count goes down. When demand rises, the share count climbs.
Shares outstanding for GDX are down 21% since last June. Check it out...
Folks are selling into the rally. And they're missing out on big gains as a result.
This is not what you would expect after such a big boom, Chris wrote, but there have been similar cases like this in the past decade (in 2016, 2019, 2020, and 2022). "And typically," Chris wrote, "higher gold prices follow."
DailyWealth Trader subscribers and Stansberry Alliance members can read Chris' full issue here. It also includes his preferred way to "play this rally" through a gold-mining business that doesn't build out or maintain mines but gets a cut from the production.
His subscribers are up 60% on this trade so far, "with more upside potential ahead," Chris says.
While Western allies don't want Iran to have nuclear capability, the Trump administration is expanding U.S. investment in the field. In This Week on Wall Street, our Director of Research Matt Weinschenk outlines the bullish case for nuclear-energy stocks...
Watch this video on our YouTube page, and be sure to subscribe for more of our free video content, like our Stansberry Investor Hour interviews, Diamond's Edge Live, and more.
New 52-week highs (as of 6/16/25): ABB (ABBNY), Antero Resources (AR), Alpha Architect 1-3 Month Box Fund (BOXX), BWX Technologies (BWXT), Cameco (CCJ), CF Industries (CF), EQT (EQT), Cambria Foreign Shareholder Yield Fund (FYLD), Lynas Rare Earths (LYSDY), Microsoft (MSFT), Sprott (SII), Spotify Technology (SPOT), Global X Uranium Fund (URA), United States Commodity Index Fund (USCI), and Telefônica Brasil (VIV).
In today's mailbag, some thoughts on Russian President Vladimir Putin "helping" Iran and Israel settle their differences...
"Putin mediating this conflict? Sounds like the worst idea ever. Not sure his concept of 'Statesmanship' is what is required." – Subscriber Joseph C.
All the best,
Corey McLaughlin with Nick Koziol
Baltimore, Maryland
June 17, 2025
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