Despite the events of the last 24 hours, uncertainty over tariffs persists, with limited clarity around both final rates and potential carve-outs. President Trump’s extension of the trade agreement deadline from 9 July to 1 August has done little to ease tensions, as it has been accompanied by increasingly aggressive rhetoric toward key trading partners.
Notably, market reactions to renewed tariff threats from Trump have become more muted over time, suggesting that investors increasingly treat such announcements as opening bids in a broader negotiation process. While this interpretation has largely proven correct to date, it does introduce the risk that markets may ultimately underestimate his willingness to implement significantly higher tariffs than currently expected. Our base case remains an effective tariff rate of 12%, but the balance of risks remains skewed to the upside.
Despite these uncertainties, we continue to see a low probability of a near-term US recession. Consumption remains resilient, supported by low energy prices – driven by expectations of rising global oil supply – and a stable labour market, which together provide a solid buffer against external shocks.
We remain constructive on equities, maintaining an overweight stance with a focus on financials in both the US and Europe. Domestic demand trends, stable earnings, and supportive interest rate dynamics underpin our positioning, even as trade policy volatility creates headline risk.
Within fixed income, we hold a neutral view on US government bonds. Although yields have adjusted higher and valuations have improved, structural concerns – including elevated debt levels and lingering inflation pressures – continue to weigh on the outlook, particularly at the long end of the curve (i.e. the yield on debt with long maturities) where volatility has increased. We are looking for opportunities outside the US, where inflation pressures are more muted.
We continue to favour German Bunds over US Treasuries and have initiated a long position in Canadian bonds versus US, capitalising on the notable narrowing in spreads observed year-to-date (the spread is the difference in yield). We continue to see gold as a valuable strategic diversifier. Against a backdrop of fiscal fragility, policy unpredictability, and broader market volatility, its portfolio insurance role remains intact.
On currencies, we maintain a negative stance on the US dollar, implemented through short positions versus the euro, long exposures to local emerging market debt, and a long Japanese yen position against the Hong Kong dollar. The US dollar’s safe-haven role has diminished amid erratic US policy direction, and with global investors overweight US assets, we expect rebalancing flows to favour non-dollar exposures as diversification regains importance.
In conclusion, we believe cyclical risks remain contained, but structural vulnerabilities – particularly around debt sustainability – are building. Our strategy balances a positive view on equities with long exposure to gold and an underweight in the US dollar, providing a measured and diversified approach to navigating an increasingly uncertain global landscape.
Key:
🟢 Long / positive
🟡 Neutral
🔴 Short / negative
🔼 Up from last month
🔽 Down from last month
Main Asset Classes
🟢 Equities
We remain positive on equities. Economic uncertainty persists, and we need to monitor its impact on corporate behaviour, but some of the downside risks are more limited in nature. Consequently, we believe the risk of a recession this year has lessened.
🟡 Government bonds
We remain neutral as medium-term concerns persist over increasing debt levels and lingering inflation risks in the US. We favour opportunities outside of the US where inflation concerns are less acute.
🟡 Commodities
Global demand remains weak, keeping us neutral on base metals despite tight supply dynamics. We have upgraded energy to neutral due to the recent spike in oil prices. We maintain a positive stance on gold, supported by persistent central bank demand.
🟡Corporate bonds (credit)
While valuations are expensive, particularly in the US, the cyclical picture continues to improve with lower yields, a robust labour market and consumer sentiment remaining strong.
Equities
🟢US
We continue our positive view on US equities supported by resilient consumption data, stable labour markets, and low energy prices. We are optimistic that pro-growth policies will support US growth and sentiment.
🟡 UK
We remain neutral on UK equities. Although earnings growth is positive, it has declined significantly, and earnings surprises remain negative.
🟢 Europe ex UK
We continue our positive view on European equities supported by fair valuations, robust inflows reflecting domestic demand, and a stable earnings outlook.
🟢 Japan
Supportive macro trends, together with increased clarity on tariffs, are expected to benefit Japanese equities, therefore we maintain our positive view.
🟢 Global Emerging Markets (EM)1
We maintain a positive outlook on emerging market equities. A weaker dollar, constructive trade negotiations, and favourable policy developments in some countries are providing positive catalysts for the asset class.
🟡Asia ex-Japan: China
We remain unchanged at neutral as growth forecasts are stable, despite concerns about domestic economic weakness and the inflationary pressures resulting from tariffs.
🟡 EM Asia ex China
While Asian markets have so far avoided immediate tariffs, their reliance on Chinese imports continues to expose them to potential risks.
1Global Emerging Markets includes Central and Eastern Europe, Latin America, and Asia.
Government bonds
🔴US
We remain negative as increasing government bond supply may sustain elevated yields for an extended period. In addition, the Treasury market no longer displays the defensive qualities traditionally seen during risk-off periods.
🟡 UK
We remain neutral. Although valuations are appealing, concerns over UK inflation persist. This has led to the Bank of England remaining cautious about cutting rates.
🟢 Europe
We continue to favour German bonds as a safe-haven position given Germany’s fiscal expansion is expected to stay disciplined and inflation under control.
🟡 Japan
The Japanese government is strongly incentivised to support the long end of the yield curve (i.e. to keep long-term interest rates low); however, we remain neutral due to ongoing to inflation concerns.
🟡 US inflation-linked bonds
We maintain a neutral view, as subdued commodity prices are offsetting the impact of higher tariffs.
🟢 Emerging markets local currency bonds
Several emerging markets are benefitting from supportive policy environments as well as from a weaker US dollar and high carry (meaning local debt pays a higher interest rate compared to other regions).
Investment grade credit
🟡 US
Valuations are still elevated and tariff developments remain unpredictable; however, the market’s focus has shifted towards deregulation and fiscal stimulus.
🟡 Europe
Our view is unchanged as spreads (the difference between government and corporate bond yields) are more appealing compared to the US, underpinned by robust growth, strong demand and improved positioning.
🟡 Emerging markets USD
We maintain a neutral stance due to elevated valuations. The asset class’s significant exposure to Asia leaves it sensitive to ongoing tariff developments.
High yield bonds (non-investment grade)
🟡US
While valuations are unattractive, the sector should benefit from stabilising growth, a pick-up in demand and positive consumer sentiment data.
🟡Europe
We remain neutral. The growth picture continues to look positive, and demand for the region is showing signs of improvement.
Commodities
🟡🔼Energy
Oil prices have gone up recently because of geopolitical concerns and are likely to remain at current levels while this uncertainty persists. However, we expect incoming supply to eventually outweigh demand, and once the current uncertainty fades, we expect prices to come down again.
🟢 Gold
We remain positive as gold continues to serve as a valuable diversifier amid fiscal concerns and geopolitical tensions.
🟡Industrial metals
Speculation around what is to come from the Section 232 investigation (examining the national security implications of copper imports) is causing a great deal of volatility in copper markets, but ultimately, we see it as short-term noise, all the while global demand growth remains tepid, keeping us neutral.
🟡 Agriculture
We remain neutral. The spike in oil prices caused a couple of biofuel feedstocks, namely soy oil, to rally, but elsewhere growing conditions remain broadly healthy leading to increased supply.
Currencies
🔴US $
Our view is unchanged reflecting the dollar’s diminished diversification benefits and the uncertainty surrounding current US policy.
🟡 UK £
The UK continues to contend with inflation, but market expectations for rate cuts seem excessive which could offer some support for sterling.
🟢EU €
We retain our positive view given its continued attractive valuations. We see investors reducing their exposure to the US dollar in favour of the euro.
🔴 🔽CNH ¥
We’ve downgraded the Chinese yuan as we see limited upside. Its fixing has been stable, and volatility has been low in 2025, which makes it a cost-effective hedge.
🟢 JPY ¥
We retain a positive view as rising wage and services inflation, coupled with anticipated steps by the Bank of Japan towards policy normalisation, should support the yen.
🟡Swiss franc ₣
Although the Swiss franc serves as an effective diversifier, we continue to exercise caution given its notably low carry (i.e. low interest rate compared to other currencies).
