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Since May, markets have continued to operate in an environment marked by policy uncertainty and rising geopolitical risks. The Trump administration’s 90-day pause on “Liberation Day Tariffs” offered temporary relief, but limited progress in broader trade talks - especially with the EU and Japan - has kept investors cautious. While a limited agreement with the U.K. was reached, the overall trade landscape remains unresolved, affecting sentiment and weighing on risk appetite.
Geopolitical tensions escalated in June, particularly with the Israel-Iran conflict. Iran’s threat to close the Strait of Hormuz - a key route for around 20% of global oil supply - triggered a sharp rise in oil prices. This has increased concerns about supply disruptions, global shipping rerouting, and broader instability in the region. The timing of this conflict has added complexity to the inflation outlook. Central banks, including the Fed, were preparing for a potential shift toward easing. However, the surge in oil prices has introduced new uncertainty. In its June meeting, the Fed held rates steady and signaled only one possible cut for the rest of the year, citing persistent services inflation and elevated geopolitical risks. A prolonged conflict could keep oil prices elevated, which may delay or limit policy easing. Concerns over U.S. fiscal stability, driven by political gridlock and unresolved budget discussions, have added to the uncertainty.
Despite these challenges, we maintain a cautiously optimistic outlook. Disinflationary trends are taking hold, and market volatility has stayed relatively contained. With a potential easing in tariff tensions, expectations of reduced geopolitical friction, and supportive fiscal and probusiness policies in China and the U.S., global equities are expected to continue recovery. Against this backdrop, we maintain a disciplined and balanced approach, guided by bottom-up fundamental analysis in our portfolio construction.
Related Market Outlooks
2025 May Market Outlook: Navigating Volatility Amid Trade Tensions and Monetary Policy Caution
April began with heightened volatility following the surprise rollout of the “Liberation Day Tariffs,” which included a blanket 10% levy on all imports and steeper country-specific rates. Markets reacted swiftly—equities tumbled, and Treasury yields dropped as risk-off sentiment took hold. A temporary rebound followed the U.S. decision to pause most tariffs, excluding those on China. However, China’s swift retaliation reignited trade tensions, pulling markets lower once again. Despite the volatility and uncertainty, equities have since staged a robust recovery, supported by a tentative trade truce between the two economic powers.
2025 April Market Outlook: Tariff Shocks Rate Dilemmas and China’s Next Move
US tariff announcements have introduced a wave of uncertainty into global markets. While the initial shock caused equities to retreat sharply, sentiment steadied somewhat after the US paused broad-based tariffs for most countries, leaving China as the primary target for higher levies. This erratic policy approach has unsettled businesses and investors alike, with US Treasury yields responding with unusual speed.
2025 March Market Outlook: Cautious Optimism Amid Policy Shifts and Economic Uncertainty
US-led trade tariff hikes have introduced significant political and economic uncertainty, primarily through passing higher costs for consumers and businesses, alongside the threat of retaliatory measures from trading partners. This has contributed to market instability and has dampened business optimism.
2025 February Market Outlook: Deepseek Shakes Up AI—Is China’s Tech Rebound Just Beginning?
The launch of Deepseek marks a notable development for China as the startup claims it is significantly more efficient than widespread models developed by US companies. The startup also claims to have developed the model with only US$ 6 million and has made their model publicly available for use globally. This stands in contrast to US technology firms, which have been spending billions of dollars. Additionally, the availability of Deepseek’s model has raised concerns about potential reductions in AI infrastructure investment.
2025 January Market Outlook: Strategies for Navigating a Shifting Global Landscape
The US equity market has benefited from the strength in its economy and leading position in artificial intelligence (“AI”) technologies. This has led to high earnings expectations being baked into stock valuations, which we find to be optimistic given the looming risk of tariffs and the ongoing cooling of the general economy. Some argue that the Trump administration will reduce corporate taxes to boost earnings and control interest rates despite inflation risks. Our view is that timing all these initiatives to benefit the US economy will be challenging and there will likely be knee-jerk reactions to any significant policy announcements, earnings misses and economic data surprises.