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Since June, investor sentiment has gradually improved, supported by resilient corporate earnings, stronger-than-expected macroeconomic indicators, and measured progress in trade diplomacy. Despite lingering policy uncertainty and geopolitical risks, market conditions have remained relatively calm, with volatility largely contained.
Trade policy continues to be a central concern. The Trump administration’s 90-day pause on tariffs is set to expire on August 1, with proposed tariffs of up to 50% on autos and consumer electronics still under consideration. However, in spite of looming tariff risks, the successful negotiation of bilateral trade agreements - with Japan, the U.K., and South Korea - has helped bolster investor confidence. The U.S. - Japan deal, which includes a reported US$550 billion investment commitment, has further supported sentiments across Asian markets, which benefits from improved trade ties and regional policy coordination.
Meanwhile, the One Big Beautiful Bill (BBB Act), which offers generous tax incentives - including permanent R&D deductions and 100% expensing of production property - has provided notable support to the technology, semiconductor, and data center sectors. While the BBB Act raises concerns over fiscal deficits, it has already helped sustain momentum in pro-growth and AI-exposed equities.
In Asia, China’s Q2 GDP growth exceeded expectations, underpinned by strong industrial output and a rebound in exports, driven in part by front-loaded shipments ahead of potential new tariffs. However, weakness in retail sales and property investment underscores China’s continued reliance on external demand and industrial production over domestic consumption - raising expectations for further targeted fiscal support in the second half of 2025.
Looking ahead, we remain cautiously optimistic. While U.S. headline CPI rose in June, disinflationary trends are still evident in core components. Profitability remains strong in key sectors, and Asia continues to benefit from trade gains and pro-growth policies. However, with valuation multiples remaining elevated, the upcoming earnings season will play a pivotal role in supporting the valuation premium. With liquidity conditions stable and market volatility subdued, we maintain a disciplined and balanced approach, guided by bottom-up fundamental analysis in our portfolio construction.
Related Market Outlooks
2025 June Market Outlook: Resilient Markets in a World of Risk
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.
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.