Back on the strait and narrow?

Global equities sold off last week as investors grappled with accelerating inflation, weakness in tech and renewed conflict in the Middle East. However, over the weekend, US and Iranian officials reached a framework agreement to end the conflict and reopen the Strait of Hormuz. Under the agreement, the strait would reopen gradually, with Iranian forces clearing mines over 30 days, and no tolls charged for 60 days. On the macro front, US CPI came in at 4.2%, in line with expectations but above the 4% level for the first time in 3 years. US producer prices increased 1.1% for the month, higher than expected, due to higher energy costs.

In Europe, the European Central Bank raised interest rates by 25 bps, as expected. ECB President Lagarde left the door open for further hikes as officials see a broadening of price pressures. In the UK, the economy contracted by 0.1% in April as higher energy prices impacted consumers. Finally, in Japan, producer prices rose more than expected (6.3% vs 5.5%) in May amid rising energy costs, putting pressure on the Bank of Japan ahead of its next policy meeting.

Last week's highlights

	US CPI Inflation (10/06) – Came in at 4.2%, in line with expectations but above the 4% level for the first time in 3 years.  US PPI Inflation (11/06) – Increased 1.1% for the month, higher than forecast.  SpaceX IPO (12/06) - Closed Friday at $161, valuing the company at $2.1tn.
	European Central Bank Meeting (11/06) – Hiked interest rates by 25 bps as expected. Lagarde left the door open for further hikes as officials see a broadening of price pressures.
	UK Gross Domestic Product (12/06) – UK economy contracted by 0.1% in April as higher energy prices impacted consumers.
	China Balance of Trade (08/06) – Trade balance was higher than expected in May as exports beat forecasts.  Japan PPI Inflation (10/06) – Producer prices rose more than expected (6.3% vs 5.5%) in May amid rising energy costs, putting pressure on the Bank of Japan ahead of its next policy meeting.

This week, the main event will be Kevin Warsh’s first meeting as the new Fed chair. Warsh is in a difficult position as the White House continues to push for lower rates despite accelerating inflation and an improving labour market. Markets expect the Fed to leave rates unchanged. The Bank of England will also meet this week and are expected to hold rates steady.

What's on the radar

	Federal Reserve Meeting (17/06) US Retail Sales - May (17/06)
	Eurozone CPI - May (17/06) Swiss National Bank Meeting (18/06)
	UK CPI - May (17/06) Bank of England Meeting (18/06)
	Reserve Bank of Australia Meeting (16/06)

Chart of the moment - The S&P 500’s weight problem

Source: Bloomberg as of 30/04/2026.

Note: Effective number of constituents is defined as the inverse of the Herfindahl–Hirschman Index (HHI) applied to index weights. The HHI, a standard measure of concentration, is calculated as the sum of squared index weights for the S&P 500.

• The “effective number of constituents” in the S&P 500 has fallen to 48, as market concentration has increased dramatically in recent years. This essentially means that the S&P 500’s performance and risk profile can be replicated by just 48 stocks. 
• The “effective number of constituents” is calculated as the inverse of the Herfindahl–Hirschman Index (HHI), a common measure of market concentration. The HHI is calculated by adding up the squared weights of each company in the S&P 500, which gives greater influence to larger constituents.
• When the effective number of constituents is low, as it is currently, the concentration creates a divergence between stock level and index level movements. A small set of mega-caps can move the index, while dispersion beneath the surface remains high.