| The most significant market story of 2025 so far has been President Trump and his tariff bonanza. A 10% import duty currently applies to all US trading partners, though it remains to be seen if - or when - this will rise further and for whom. Trump is also pushing to preserve tax cuts by slashing welfare spending, while simultaneously adding trillions to US national debt. Elsewhere, tensions have eased in the Middle East, and Prime Minister Starmer sees a revolt over welfare reform. We can safely say that the first six months of 2025 have been anything but boring, with an evolving geopolitical landscape giving financial markets plenty to dwell on. The story that has captured the most airtime has undoubtedly been Trump’s on-off-on-again tariff saga, involving duties levied on US imports. As it stands today, a universal 10% tariff applies to all countries, with additional country-specific tariffs of up to 50% on most trading partners currently suspended until July 9th. There are also separate 50% tariffs on cars, steel, and aluminium. The hope is that trade deals will be struck, but time is running out - and so far, only the UK has reached an agreement with the US. When the tariffs were first announced on 'Liberation Day' in early April, markets around the world slumped in reaction. Just days later, when a suspension was declared, they rebounded sharply. This tale is still unfolding, and speculation around potential trade deals continues. What we can say with some confidence is that the US is not returning to pre-April tariff levels, and the implications for global trade, the US consumer, and corporate investment decisions will be significant and lasting. To the dismay of economists everywhere, President Trump is also pushing to pass his 'big beautiful bill' - a piece of legislation as humble as its name suggests. In essence, it extends tax cuts by slashing spending on healthcare and social welfare programs. In addition to leaving millions of poorer Americans worse off, the bill could add an estimated $3-4 trillion to the US national debt over the next decade. With debt levels already eye-wateringly high, many see this as an act of fiscal irresponsibility. The attacks on Iran by Israel and the US in June caused oil prices to spike briefly, only for them to fall back sharply as tensions eased and a ceasefire was declared. Unfortunately, the Middle East remains a flashpoint for global instability, with oil prices continuing to be highly sensitive to any further escalation. Meanwhile, the Prime Minister’s ‘Starmtroopers’ refused to back the government’s welfare reforms, resulting in the bill being watered down to the point of near-meaninglessness. While MPs across party lines agree that welfare - and broader - reform is needed, they remain deeply divided on how to deliver it. All the while, Nigel Farage’s Reform UK party is busy outpacing them in the polls.Bottom LineWith so much going on in the world, one might have expected markets to face a challenging 2025 so far. While they were certainly buffeted in April by you-know-who and his big board of tariff fun, most are in positive territory year-to-date. That said, global confidence in the US has taken a knock. Combined with a deteriorating fiscal backdrop, many investors have begun to question how much exposure to the US they should maintain - a theme we expect to persist. |
| Q&A: What’s on your mind? |
| What has fixed income done in 2025? So far in 2025, bond markets around the world have had mixed results. Some government bonds - like those from the US and Germany - have made small gains. UK government bonds (gilts) could do well in the months ahead if interest rates fall more than expected, which tends to push bond prices up. Corporate bonds have done better. Safer bonds have held steady, while riskier ones have made strong gains, helped by high interest payments and a decent economic outlook. Overall, after a few tough years, bonds are having a better time in 2025 - though performance varies depending on where and what you invest in. What have equities done in 2025? Stock markets have had a volatile 2025 but are generally in positive territory. There was a big dip in April, triggered by trade tensions and global uncertainty, but markets bounced back in May and June. US shares are slightly up in dollar terms, but for UK investors, they’re actually down due to a weaker US dollar. Closer to home, European shares have done well, especially in sectors like banking and defence. UK shares have also had a good run, with nearly double-digit gains so far this year. Emerging markets, particularly in Asia, have seen strong growth as their economies have improved. All in all, it’s been a good year for shares - especially those outside the US. What have real assets done in 2025? Investments in real assets - such as commodities, property, and infrastructure - have generally done well this year. Prices of industrial metals like copper have risen, though oil and gas prices have stayed fairly flat. Gold has been a strong performer, as nervous investors looked for a safe place to put their money. Infrastructure assets - especially utilities - have delivered steady returns, as it's a sector that can be favoured for its stability. Property markets are also starting to recover, helped by falling interest rates. In short, real assets have offered solid returns in 2025, with many investors drawn to their steady income and diversification benefits |
