Risk-On Sentiment Surges as Middle East Tensions Ease

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Macro Overview

Global markets started the week on a strong footing, driven by news of de-escalating geopolitical tensions between the U.S. and Iran. U.S. equities led the charge, with the S&P 500 (IVV) advancing 1.47%, supported by positive manufacturing and consumer sentiment data. International stocks also gained but at a more subdued pace, with Developed ex-U.S. (EFA) up 0.42% and Emerging Markets (EEM) rising 0.36%. The primary outlier was the commodities complex, where Broad Commodities (DJP) fell 1.50% as crude oil prices tumbled, while fixed income posted modest gains.

U.S. Size & Style

Growth stocks significantly outpaced their value counterparts in Monday’s broad-based rally. Large Growth (IVW) jumped 2.21%, while Large Value (IVE) posted a more modest 0.60% gain. This trend of risk-on leadership extended down the capitalization spectrum, with Small Growth (IJT) rising 1.80%. The strength was widespread, as all nine U.S. size and style segments finished the session with positive returns.

Name (Ticker) 1-Day 1 Month 3 Month YTD 1 Year
Large Value (IVE) 0.60% 1.26% 4.70% 10.75% 21.88%
Large Cap (IVV) 1.47% 1.72% 5.43% 11.74% 23.33%
Large Growth (IVW) 2.21% 2.09% 5.96% 12.35% 24.23%
Mid Value (IJJ) 1.00% 1.74% 5.64% 14.25% 23.96%
Mid Cap (IJH) 1.12% 0.03% 4.79% 15.87% 24.18%
Mid Growth (IJK) 1.28% -1.58% 3.96% 17.21% 24.19%
Small Value (IJS) 1.63% 2.02% 7.24% 22.21% 41.71%
Small Cap (IJR) 1.65% 0.94% 7.91% 23.60% 38.11%
Small Growth (IJT) 1.80% -0.05% 8.67% 24.92% 34.82%

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U.S. Sectors & Industries

Cyclical sectors led the market higher, reflecting the positive shift in investor sentiment. Communication Services (XLC) was the day’s top performer, climbing 2.86%, with Industrials and Consumer Discretionary also posting gains above 1.80%. In stark contrast, the Energy (XLE) sector was the clear laggard, declining 1.28% in response to a sharp drop in crude oil prices. Defensive areas like Health Care and Consumer Staples also finished with minor losses.

Name (Ticker) 1-Day 1 Month 3 Month YTD 1 Year
S&P 500 (SPY) 1.42% 1.73% 5.41% 11.70% 23.21%
Communication Services (XLC) 2.86% 1.59% -4.36% -4.87% 6.24%
Industrials (XLI) 1.85% -0.41% 6.16% 18.69% 23.88%
Consumer Discretionary (XLY) 1.83% 0.93% -0.15% -0.61% 10.26%
Technology (XLK) 1.53% -1.41% 10.12% 23.96% 39.23%
Materials (XLB) 1.15% -1.92% -0.29% 13.40% 19.77%
Financials (XLF) 0.77% 3.16% 10.90% 5.67% 13.36%
Real Estate (XLRE) 0.24% 1.12% 2.82% 13.69% 13.16%
Utilities (XLU) 0.02% -3.06% -4.10% 5.30% 6.27%
Health Care (XLV) -0.19% -0.92% 12.26% 5.70% 25.88%
Consumer Staples (XLP) -0.22% -0.15% 1.52% 10.62% 8.81%
Energy (XLE) -1.28% 10.47% 0.61% 33.28% 41.62%

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Global Thematic

Thematic ETFs saw leadership from niche technology and defense-related strategies. The Defiance Drone and Modern Warfare ETF (JEDI) surged 6.52%, while digital asset-related funds like the CoinShares Bitcoin Mining ETF (WGMI) also performed strongly. On the other side of the ledger, the day’s worst performers were concentrated in energy infrastructure and MLP funds. These strategies declined in unison with the broader energy sector, which was pressured by falling crude oil prices.

Name (Ticker) 1-Day
Leaders
Defiance Drone and Modern Warfare ETF (JEDI) 6.52%
CoinShares Bitcoin Mining ETF (WGMI) 6.39%
Tema Space Innovators ETF (NASA) 5.69%
VanEck Onchain Economy ETF (NODE) 5.60%
REX Drone ETF (DRNZ) 4.88%
Laggards
Invesco SteelPath MLP & Energy Infrastructure ETF (PIPE) -1.16%
USCF Midstream Energy Income Fund ETF (UMI) -1.10%
Global X MLP & Energy Infrastructure ETF (MLPX) -1.08%
VanEck Energy Income ETF (EINC) -1.06%
VanEck Agribusiness ETF (MOO) -0.91%

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Developed ex-U.S. & Emerging Markets

International equities posted gains, though performance lagged the robust rally in the United States. Among developed markets, South Korea (EWY) was a standout with a 2.00% advance, while Germany (EWG) rose 1.24%. Emerging markets were more mixed, as gains in Taiwan (EWT) and South Africa (EZA) were partially offset by declines in Latin American markets such as Brazil (EWZ).

Name (Ticker) 1-Day 1 Month 3 Month YTD 1 Year
Developed Markets ex-U.S.
Developed ex-U.S. (EFA) 0.42% 1.58% 5.47% 12.14% 25.61%
Australia (EWA) 0.20% 4.66% 1.87% 13.85% 17.05%
Canada (EWC) 0.44% 3.25% 2.62% 11.12% 31.85%
France (EWQ) 0.99% 2.37% 6.08% 6.97% 16.75%
Germany (EWG) 1.24% 2.53% 4.52% 4.10% 8.57%
Hong Kong (EWH) -0.69% 9.51% -2.07% 9.59% 18.26%
Japan (EWJ) 0.56% -0.25% 5.78% 15.69% 30.88%
Netherlands (EWN) 1.03% -0.07% 8.40% 19.52% 39.18%
South Korea (EWY) 2.00% -11.05% -1.09% 64.82% 131.97%
Switzerland (EWL) 0.02% -1.27% 4.91% 7.22% 22.61%
U.K. (EWU) -0.37% 2.27% 4.05% 11.24% 24.87%
Emerging Markets
Emerging Markets (EEM) 0.36% -2.10% 0.80% 18.16% 36.05%
Brazil (EWZ) -0.63% 5.78% -6.75% 15.73% 42.92%
China (MCHI) 0.18% 9.80% -2.52% -6.33% 0.78%
India (INDA) 0.72% 1.21% 2.12% -7.20% -4.86%
Indonesia (EIDO) 0.81% 8.91% -15.15% -32.12% -27.22%
Malaysia (EWM) 0.11% 4.23% -2.78% 4.86% 21.54%
Mexico (EWW) -0.34% 1.39% 1.32% 12.03% 32.85%
South Africa (EZA) 1.12% 0.52% -3.68% -4.52% 29.71%
Taiwan (EWT) 1.48% -6.56% 8.90% 54.23% 75.53%
Thailand (THD) -0.12% 1.86% 5.29% 25.12% 34.70%

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Fixed Income

The fixed income market saw broad gains as Treasury yields retreated on the back of falling oil prices. Longer-duration bond funds outperformed, with the Long-Term (BLV) portfolio gaining 0.44%. The risk-on sentiment also benefited credit-sensitive assets, as Convertible bonds (CWB) rallied 1.63% and High Yield (HYG) added 0.27%. Overall, nearly every segment of the bond market finished the day in positive territory.

Name (Ticker) 1-Day 1 Month 3 Month YTD 1 Year
Multisector
Long-Term (BLV) 0.44% -3.14% -2.20% -2.38% -0.29%
Core (AGG) 0.23% -1.03% -0.65% -0.33% 2.08%
Core Enhanced (IUSB) 0.18% -0.93% -0.53% -0.10% 2.45%
Short-Term (BSV) 0.10% -0.12% 0.13% 0.52% 2.46%
Government
Long-Term (SPTL) 0.37% -3.14% -2.50% -2.91% -1.35%
Intermediate (SPTI) 0.16% -0.59% -0.61% -0.61% 1.29%
Short-Term (SPTS) 0.08% 0.08% 0.36% 0.83% 2.70%
Ultrashort (BIL) 0.01% 0.28% 0.91% 2.10% 3.78%
Inflation Protected (TIP) 0.01% -0.63% -1.25% 0.55% 1.81%
Specialty
Convertible (CWB) 1.63% -0.83% 1.84% 16.87% 25.28%
Preferred Stock (PFF) 0.96% 0.93% -1.17% 1.85% 4.04%
High Yield (HYG) 0.27% -0.02% 0.52% 1.81% 5.12%
Bank Loans (BKLN) 0.20% 0.93% 0.79% 0.85% 4.28%
Corporate (SPIB) 0.17% -0.52% -0.01% 0.35% 2.85%
Mortgage Backed (MBB) 0.15% -1.14% -0.82% -0.19% 3.24%
International & EM
International Local (IGOV) 0.56% 0.49% -1.39% -1.01% -0.70%
Emerging USD (EMB) 0.53% -1.08% 0.41% 1.44% 7.53%
International USD (BNDX) 0.39% -0.58% 0.44% 0.62% 1.23%
Emerging Local (EMLC) 0.16% 0.19% 1.47% 1.94% 8.15%
Municipals
Intermediate (MUB) 0.09% -1.64% -0.48% 0.30% 4.58%
High Yield (HYD) 0.09% -2.57% -0.68% 0.49% 5.88%
Long-Term (MLN) 0.06% -2.14% -0.49% 1.07% 7.39%
Short-Term (SUB) 0.05% -0.10% 0.31% 0.81% 1.90%

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Commodities

The commodities complex was dominated by a sharp sell-off in the energy sector after geopolitical tensions in the Middle East eased. WTI Crude (USO) plunged 5.46%, dragging the broader energy index down over 4%. In contrast, agricultural commodities had a strong session, with Wheat (WEAT) and Sugar (CANE) advancing 1.89% and 2.29%, respectively. Precious metals such as Gold (GLD) ended the day nearly unchanged.

Name (Ticker) 1-Day 1 Month 3 Month YTD 1 Year
Broad Commodities (DJP) -1.50% 7.07% -6.96% 24.09% 38.86%
Agriculture
Sugar (CANE) 2.29% 0.72% -2.09% 0.87% -9.14%
Wheat (WEAT) 1.89% 8.26% 1.04% 21.48% 12.84%
Corn (CORN) 1.59% 6.35% -5.08% 1.13% 4.43%
Broad (DBA) 1.02% 3.93% -1.14% 8.89% 12.14%
Soybeans (SOYB) 0.32% 3.27% 1.16% 15.46% 19.00%
Energy
Natural Gas (UNG) 0.50% -12.69% -5.60% -17.54% -25.77%
Broad (DBE) -4.26% 15.98% -8.07% 71.26% 61.35%
Brent Crude (BNO) -5.06% 20.57% -16.48% 68.89% 54.59%
WTI Crude (USO) -5.46% 17.45% -14.48% 76.58% 57.66%
Industrial Metals
Copper (CPER) 0.20% 6.30% 9.41% 13.39% 43.78%
Broad (DBB) 0.12% 5.13% 1.74% 9.81% 34.83%
Precious Metals
Silver (SLV) 0.19% -4.65% -23.18% -18.57% 56.18%
Gold (GLD) 0.05% -1.70% -12.16% -6.21% 20.25%
Broad (DBP) 0.02% -2.21% -14.70% -9.59% 24.78%
Platinum (PPLT) -1.34% 0.27% -18.00% -20.83% 22.95%
Palladium (PALL) -1.72% -0.35% -17.46% -21.48% 3.67%

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Cryptocurrency

Digital assets participated in the broader risk-on rally, posting modest but consistent gains across the complex. The Multi-Coin (NCIQ) index advanced 1.55%, moving in tandem with technology-oriented equities. Bitcoin (IBIT) rose 1.46%, with other major crypto assets posting similar increases. The positive performance provided a slight reprieve for an asset class that has been under pressure in recent months.

Name (Ticker) 1-Day 1 Month 3 Month YTD 1 Year
Ethereum (ETHA) 0.28% 9.72% -19.00% -37.09% -46.77%
Solana (SOLZ) 1.37% -8.59% -11.96% -41.22% -58.44%
Bitcoin (IBIT) 1.46% 3.70% -18.69% -27.17% -43.69%
Multi-Coin (NCIQ) 1.55% 4.14% -18.63% -29.86% -46.73%
XRP (XRP) 1.77% -0.41% -22.48% -41.18%

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What to Watch Today

Looking ahead to Tuesday, investors will be monitoring key labor market data with the release of the June Job Openings and Labor Turnover Survey (JOLTS) at 10:00 AM ET, following the Trade Balance report earlier in the morning. Corporate earnings season continues to be a major focus, with reports due from industrial bellwether Caterpillar and pharmaceutical giants Merck and Pfizer before the market opens. After the close, results from technology firm Advanced Micro Devices and biotech Amgen will be closely watched.

This material is for informational purposes only and should not be considered investment advice. All investments, including ETFs, involve risk, including the possible loss of principal. Investors should consider their investment objectives, risks, charges, and expenses carefully before investing.

This analysis was developed by the team at ETF Action. We leverage advanced AI tools to assist in the drafting and refinement of our content, based on our expert prompts, direction, and final review.