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 signalled 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.