The Federal Reserve's latest Beige Book — a survey of economic conditions across all 12 Fed districts — flags the Iran war as a major source of uncertainty causing U.S. businesses to pull back on significant investment decisions. Overall economic activity still grew at a slight-to-modest pace across most regions, but the qualitative tone from business contacts has darkened. The gap between still-positive activity and shrinking forward investment is the key tension in this report.
When businesses stop investing — in equipment, hiring, and expansion — it acts as a slow leak on future economic growth and corporate earnings, which eventually pressures stock prices. This is particularly relevant for capital-intensive sectors like industrials, manufacturing, and energy, where large spending commitments are the norm. If investment paralysis persists, it could give the Fed more reason to cut rates sooner, which would be a tailwind for bonds and rate-sensitive equities.
Next FOMC meeting and rate decision: June 17-18, 2025. Next Beige Book release: approximately July 23, 2025. Watch for any U.S.-Iran diplomatic developments or escalation signals that could shift business sentiment further.
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