Market Compass May 2025

Highlights:

• US President Trump keeps testing the limits of markets and the US economy. While investors seem to be getting used to high US policy uncertainties, the economic fallout from tariffs is still to show up in the hard data.
• Yields remain geared to the downside, though only modestly so after the recent pullback. Any USD respite is likely to prove short-lived as the safe-haven shine of the greenback has been severely damaged and investors are likely to trim strategic US exposure.
• We favor exposure to Euro Area credit as trade deals and tariff exemptions may provide further market relief and peak uncertainty may be behind us. But with US moderate recession risks looming and the Fed constrained by stagflationary forces, we refrain from chasing the global equity market rebound.

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