By Craig McAvinue – 1 June, 2025
"Markets are constantly in a state of uncertainty. Money is made by discounting the obvious and going with the unexpected"
As we reach halftime in 2025, the overall outlook for the markets is positive. Most indexes are seeing an upward trend in June and sitting higher than at the start of the year..
The US dollar continues to weaken, with some pretty significant gains for other major currencies during the year so far…
Data from Google Finance
The S&P 500 reached a record high at the end of June and up a considerable 24% since its 8th April low.
It’s been an eventful month on the geopolitical scene with the ongoing trouble in the Middle East and the US’s intervention over Iran. Whilst much media would lead you to believe we’re heading into World War Three, as is so often the case, these events and market performance are not intrinsically linked. Sure we may see some knee jerk reactions, but that’s all they are. Fundamentals remain strong
Key economic factors driving the positivity are
Trade Optimism: A 90-day tariff reprieve between the U.S. and China, reducing U.S. tariffs from 145% to 30% and Chinese tariffs from 125% to 10%, sparked a risk-on tone. Reports of a new U.S.-China trade deal and progress in negotiations with other countries further bolstered markets.
Federal Reserve Policy: The Federal Reserve maintained interest rates at 4.25%–4.50% during its June 17-18 meeting, signaling a “wait-and-see” approach due to tariff-related uncertainties. However, dovish comments from Fed officials and a “dot plot” indicating potential rate cuts by year-end fueled optimism, with expectations for a 25-basis-point cut in July rising to 20% from 16%.
If 2025 finishes positive, this will mark the third successive year of growth in the S&P 500. Whilst this is not an unusual landmark, with the “hat trick” taking place already on four occasions this century, previously the recovery from market crashes (dot com and Financial crisis) and the quantitative easing policy of the Fed (2019 – 2021) have been factors in the recovery. This period of growth is driven by more fundamental sound economic elements.
Unemployment and inflation remain in a steady state at 4.2% and 2.8% respectively.
Outside of the US other major markets had a very good six months, both the Dax in Germany and the Hang Seng in Hong Kong seeing gains around 20% year to date.
Complacency in equity markets is never a good idea. With the current Trump administration and still some uncertainty over the tariff scenarios, we will no doubt see more volatility before 2025 is over. But just like we saw in April, often these spikes are short lived.
The US Dollar continues to fall against other major currencies. Many believe this to be by design and 2025 is now into double digit losses against the Euro and nearing that mark for other major currencies such as Sterling and the Japanese Yen.
If the current movements remain where they are at year end, we would have seen the worst performing year for the US dollar in 22 years. This reminds us that when holding assets (especially income producing assets for those of us living in Thailand and Vietnam) having some diversity here is key.
The key is understanding your time frame, risk appetite and getting the right results for you…
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