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17.06.2025 01:27 PM
Playing on edge: can markets ignore geopolitics for another day?

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The US stock market continues to disregard geopolitical realities. Indices have approached key levels and are ready for a breakout. The only question is, in which direction? If upcoming events (PPI, Fed, retail sales) do not disappoint, chances for an upside breakout are high. But if headlines flare up again, a sharp reversal is likely. At this point, it is important not to act blindly but to read the market carefully.

Tuesday morning opens with a cautious pullback. After strong gains on Monday, investors have tapped the brakes for good reason. Geopolitics is once again coming to the forefront, bringing with it a renewed sense of anxiety that seemed absent the day before.

On Monday, the indices posted confident gains: Dow +0.75%, S&P 500 +0.94%, Nasdaq delivered an almost perfect impulse with +1.52%. The leaders were in the technology, communications, and consumer sectors. It is a classic reaction to positive expectations.

Investors appeared to ignore Israel's strikes on Iran as well as Trump's statement calling for a "full evacuation of Tehran." Under normal circumstances, such rhetoric would have been explosive for the stock market. But for now, the media noise effect seems to dominate. As long as the word "sanctions" is not being used, capital flows into risk assets.

However, geopolitics is not just background noise. In response to the escalation, Iran has begun engaging Middle Eastern countries to apply diplomatic pressure on the US and Israel. Rumors about Tehran's flexibility in nuclear talks are also part of the game.

If this rhetoric does not lead to actual de-escalation, market sentiment could shift sharply in the coming days. For now, though, investors continue to hope it will all quietly fade away.

In this situation, the Federal Reserve plays a significant role. The meeting is scheduled for this week, and expectations are quite clear. Key rates are expected to remain unchanged. Still, the fact that the Fed will make its decision amid heightened geopolitical tensions raises particular interest in the press conference.

Will the Fed's rhetoric soften? Will it acknowledge external risks? Or will it once again pretend that the US economy is an isolated island?

Technical Analysis

The S&P 500 is stuck near a key psychological level that grows more significant with each passing day. Yesterday, there was a clear test of the 5,927 zone (intraday low), from which the index bounced.

The key levels now are 6,005 and 6,050–6,075. These levels coincide with the weekly trendline, and a breakout above could trigger an acceleration toward 6,100+. However, without a political resolution and confirmation from macro data, any breakout could turn out to be false.

Support remains at the 5,950–5,930 zone, followed by 5,895. As long as the price stays above 5,950, the trend remains intact. A break below would signal a reversal and a rise in volatility.

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The Nasdaq 100 posted a strong intraday move on Monday, closing up 1.5%. Resistance lies at 21,900. A breakout here opens the way toward 21,970 and then 22,100–22,150.

Technically, Nasdaq is outpacing the S&P, which may be an early sign that large investors are once again favoring tech plays amid growing uncertainty.

Key support lies at 21,400–21,300. If a reversal occurs, this area will be watched for potential long entries.

Key events of week and outlook

Today's focus will be on US retail sales data. It is a critical indicator of consumer activity, especially ahead of the Fed meeting. The market will closely assess the strength of domestic demand.

Weak figures would increase pressure on the dollar and strengthen the case for dovish Fed rhetoric. Strong data, on the other hand, may weigh on equities by raising concerns of delayed rate cuts.

Geopolitics remains an unpredictable factor. Trump's tweets and Iran's responses could change the dynamics at any moment. For now, the market pretends to believe in a ceasefire, but any new outbreak of violence could rapidly change the agenda.

Technically, both indices are trading at the upper edge of their ranges. The market needs a catalyst to break higher. This could be dovish Fed signals, de-escalation in the conflict, or strong retail sales data. Otherwise, profit-taking at current levels is highly likely.

Vertiv Holdings: quiet giant at intersection of AI and infrastructure

Vertiv Holdings (VRT) took center stage on Monday, delivering a powerful move on the back of two developments: a strategic deal with NVIDIA and target price upgrades from Wall Street analysts. The stock closed at $117, just a step away from a new breakout, and not only a technical one.

Vertiv is not a hyped startup, but rather a systematic player long operating at the intersection of technology infrastructure and energy. The company manufactures equipment for data centers, including cooling, power distribution, and automation systems that are all critical for modern data centers, particularly those built for artificial intelligence.

In an era where every second investment thesis seems tied to AI, Vertiv's specialization suddenly looks highly attractive.

The growth catalyst was the announcement of its partnership with NVIDIA. Vertiv will supply energy-efficient 142kW cooling architecture and a reference power model for the flagship GB300 NVL72 platform, one of the most advanced AI computing solutions available.

This is not just a commercial deal. It is confirmation that Vertiv is becoming a core infrastructure backbone for the next wave of digital transformation.

Analysts responded immediately. Citi raised its price target to $130, projecting 11% upside from current levels. Evercore went even further, to $150 per share, a potential 28% gain. On average, the current price target stands at $120, which itself appears conservative given Vertiv's 45% sales growth and over 20% profit increase reported for Q1.

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An important note is that Vertiv is not a temporary story. According to Citi, demand for data centers is expected to grow at 14% annually through 2030. This creates a long-term structural trend in which Vertiv is organically embedded as a provider of hardware and architectural solutions.

Portfolio managers like Cliff Greenberg from Baron Small Cap Fund are already betting on Vertiv, seeing its sustainable competitive advantage, especially as new chip generations demand higher heat conductivity and energy efficiency.

High temperatures and increased computing density are exactly the environment where Vertiv thrives.

From a valuation perspective, while the current P/E of ~64 may seem high, this is misleading. The forward multiple is already down to 31, and the PEG ratio is below 1, meaning the market has yet to fully price in Vertiv's long-term EPS growth.

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