Federated Hermes: Weekly Markets Wrap Up 18 June 2026

June 18, 2026

Sue Hill, Head of Government Liquidity Group at Federated Hermes

A More Hawkish Fed Emerges

A shortened statement, no forward guidance, an abundance of task forces. Kevin Warsh made his mark on his first press conference as Fed Chair, with the promise of more to come. But the novelty of the Fed Chair’s communication differences overshadowed what was probably the biggest news - the hawkish shift among the FOMC as reflected in the revised dot plot.

Nine of the 18 FOMC participants pencilled in a 2026 rate hike, versus the median expectation for an ease that was reflected in the March dot plot. While the Chair refrained from submitting a dot of his own, the hawkish tilt combined with a sparse statement, that highlighted only the inflationary aspect of the Fed’s dual mandate, has shifted market pricing towards a tightening before year end.

Phil Orlando, Chief Market Strategist at Federated Hermes

Markets React to FOMC

Markets responded poorly following the FOMC meeting, with the two-year Treasury yield surging to 4.20%, its highest level since February 2025.  That triggered a risk-off move for stocks as well, with all major indices trading down by more than 1%.

In other US economic news this week, retail sales in May were much stronger than expected, with nominal sales rising by 0.9% month on month, while control sales (which feed directly into the quarterly GDP calculation) leapt by 0.7% month on month. While gasoline prices at the pump were certainly higher, they were offset by stronger growth from auto-related sales and on-line commerce.

Damian McIntrye, Head of Multi-Asset Solutions Team at Federated Hermes

World Cup Impact on Economies

The World Cup is now underway in North America, with games scheduled for a range of host cities across the US, Mexico, and Canada. An event such as this sets off bursts of highly specific tourism. The news is filled with viral social media posts from Germans and Swedes discovering the wonders of American suburbia and ranch dressing – and of the French national team holed up in a posh Boston hotel.

In economic terms, all of this activity adds up. Expenditures on the tournament are set to add $45 billion to global GDP; and, in this sense, it’s like the “Taylor Swift effect” all over again. The US and its neighbours will bank a big chunk of that, but the sporting gains are spread quite broadly what with airfare, merch, tickets and so forth.

But does winning or losing in the tournament make any odds at a country level? Some older studies show that losing in the elimination round of the tournament has been bad for that country’s stock market the next day. Interestingly, though, the data suggests that winning hasn't helped. The net result is that the tournament was often a bit of a bumpy ride for stocks, since there’s no winner’s premium to offset the losers’ declines.

James Cook, Investment Director for Emerging Markets at Federated Hermes

AI Leadership Narrows Across Asia

The strength of artificial intelligence related companies across Asia ex-Japan is undeniable. Earnings expectations have risen, capital has followed, and performance has reinforced itself. Yet markets are no longer moving evenly. A relatively small group of names is doing much of the heavy lifting, with capital repeatedly recycling into the same perceived winners. In that sense, flows have become at least as important as fundamentals in determining outcomes.

That’s not unusual. We’ve seen similar patterns before. At points such as 2000 and, more recently, 2020, powerful structural themes co-existed with increasingly narrow market leadership. The opportunity set did not disappear, but it became more asymmetric. Upside remained, but the margin for error tightened, particularly where valuations were already discounting strong and sustained outcomes.

That feels relevant again today. AI is clearly reshaping parts of the earnings landscape in Asia, but the market response has been uneven. Capital has been drawn into a concentrated subset of companies, reinforcing both performance and benchmark concentration. The result is a growing divergence between crowded growth and more overlooked areas where expectations remain subdued.