by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment today opens with the latest on the conflict in Iran, where optimistic news about a possible ceasefire is being matched by a Republican lawmaker’s proposed resolution of impeachment against Defense Secretary Hegseth. We next review several other international and US developments that could affect the financial markets today, including the latest on the Nvidia scandal and a Federal Reserve official’s call for a big 50-basis-point hike in the central bank’s benchmark fed funds rate.

United States-Iran: Yesterday, Rep. Thomas Massie (R-KY) filed a resolution of impeachment against Secretary of Defense Hegseth for illegally bringing the US into its war against Iran without congressional authorization, among other charges. Under House rules, the resolution must be voted on by Wednesday. While most Democrats are likely to vote for the resolution, it isn’t clear whether enough Republicans will vote in favor for it to pass. If the resolution does pass, Hegseth would be subject to a trial in the Senate.

• In any case, the move may heap more pressure on the administration to cool its attacks on Iran. In turn, that could help push global energy prices lower, giving stocks a further boost.
• Meanwhile, both the US and Iran are reportedly continuing to stage sporadic, low-level attacks against each other as they try to degrade each other’s capabilities and undermine the other side’s will to keep fighting. Reports today say the US was forced to move some of its mid-air fueling aircraft yesterday from an air base in England to Germany and elsewhere after intelligence indicated the Iranians were planning attacks against the planes and their pilots.

United States-Nvidia-China: In the scandal involving Nvidia chief Jensen Huang and his affair with an alleged Chinese spy, new reports say a US Commerce Department probe into the smuggling of Nvidia computer chips by the woman’s company in Singapore was abruptly put on ice late last year. Along with other revelations about the affair, the shutdown of the probe suggests that Huang and sympathetic members of the US administration may have gotten the highest-level US decisionmakers to overlook national security concerns about Nvidia exports to China.

• As more details of the scandal dribble out, it increasingly appears that Nvidia will face a lengthy investigation and bouts of negative publicity about not just Huang’s personal conduct but also the firm’s role in potentially undermining US national security and gaining too much influence over the federal government.
• Such concerns are consistent with the new “techno industrial state,” which we described in our Economic and Financial Outlook for 2026 as the unusually deep, mutual support and cooperation between big technology firms and the federal government. Besides potentially making such tech firms more politicized and less efficient in the long term, the Nvidia scandal shows how the deep relationship could subject these companies to regulatory, reputational, and other risks in the near term.

US Monetary Policy: Fed board member Christopher Waller said at a conference in London that the central bank should consider a big 50-basis-point hike in its benchmark short-term interest rate if October’s core consumer price index — to be released today — shows another strong monthly rise. Even if the report shows cooler inflation, Waller said he would support another 25-basis-point rate hike to help ensure inflation keeps falling. The statements underscore the risk of further rate hikes and increased headwinds for stock prices in the coming months.

US Fiscal Policy: The Associated Press late yesterday finally called California’s Proposition 40, which would have imposed a one-time wealth tax on billionaires. The count so far shows 52.8% of voters rejecting the proposal versus 47.2% voting in favor. The defeat of the tax is likely good news for investors because it could take the wind out of the sails of any similar measures in other states or at the federal level.

US Regulatory Policy: The Food and Drug Administration yesterday said it will require Lilly, Novo, and other makers of GLP-1 receptor agonists to adopt product labels saying the medicines carry a potential increased risk of a rare but serious eye condition that can result in “acute, painless, decreased vision in one eye, including permanent vision loss.” The scary new warning labels could slow the use of the blockbuster drugs and weigh on the drugmakers’ revenues, profits, and stock prices.

Italy: In testimony before parliament today, the head of the Italian Banking Association warned that the 7 billion EUR ($7.8 billion) in tax hikes on the banking sector in the government’s draft 2027 budget would threaten economic growth. The pushback from the banking sector illustrates how the right-wing government of Prime Minister Meloni has been trying to balance its populist ideology with fiscal responsibility.

• As discussed in our new Bi-Weekly Geopolitical Report on right-wing governments in Europe, which was published yesterday, Prime Minister Meloni has generally favored reduced regulation and taxation on Italy’s corporate sector. However, she has also taken care to narrow the country’s budget deficit after it ballooned during the coronavirus pandemic.
• In our new report, we argue that Europe’s right-wing parties are likely to become more pragmatic as they come closer to seizing power. Many investors today seem to fear that their populist ideologies will lead to overly loose policy, but Meloni’s actions in government to date suggest that right-wing governments in places like France or Germany might adopt more fiscally responsible measures.

China: October exports were up 36% from the same month one year earlier, driven by strong foreign sales of items such as electric vehicles, semiconductors, and industrial robots. October imports were up an even stronger 41%, largely because of the need for foreign subcomponents and raw materials. The data means that China’s total trade surplus for the year to date is now more than $1.04 trillion. The full-year surplus in 2026 will therefore probably surpass last year’s record of $1.19 trillion — a development that will likely lead to further global trade tensions.

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