Global Investment Views - June 2025

The art of policymaking is a lot about setting expectations against which all future decisions are assessed. When President Trump famously introduced his extreme tariffs on ‘Liberation Day,’ markets were obviously concerned. Since then, resilience in US labour markets, better-than-expected earnings, and trade war de-escalation have boosted sentiment. Risk assets have rebounded, and bond yields risen.

US CPI inflation and wage growth seem to be under control, but bond vigilantes are up and taking note of the high fiscal deficit and debt (huge amount of US debt maturing this year), and inflation expectations. The boost to economic growth from lower tariffs is also driving yields upwards. In an environment of a sharp increase in yields across the DM, we maintain our global and selective approach.

The temporary understanding between the US and China has provided relief to the markets, thus allowing for a rebound. However, corporate guidance from the earnings season confirms our view that more clarity is needed for businesses to make investment decisions and assess the impact on their future earnings. Any deterioration in labour markets and inflation expectations that stay high for long periods will likely affect spending patterns and stock valuations.  

Fed easing and dollar weakening paint a positive picture for EM. We are also seeing growing optimism following the better-than-expected initial outcome of the US-China trade negotiations, but elements of worry remain. Issues such as the status of tariffs after the 90-day period, the unpredictability around President Trump’s negotiation, and the recent downgrade of US ratings may create volatility.

While the worst-case scenario in terms of tariffs on US and Chinese exports has been avoided, we think there is still huge uncertainty with respect to trade policies, growth/inflation, and earnings in H2. There are renewed concerns over fiscal deficit and government debt. For the time being, the US economy and labour markets are showing strength. Hence, we have tactically rebalanced our risk stance in markets, which are being driven by momentum currently. We also think investors should consider this as an opportunity to strengthen their hedges.