Market Compass June 2025

Highlights:

• The economic fallout of Trump’s tariffs has still to show up in the hard data. But peak trade uncertainty is probably behind us. Trump’s blinking and recent court challenges to the tariffs’ legitimacy have curbed the likelihood of a worst-case scenario that would have included a US recession.
• Investors are still cautiously positioned on risk assets and may react more favorably to further aspects of Trump’s agenda, notably on deregulation.
• We favour a slight tactical long duration in euro area fixed income given further European Central Bank rate cuts (ECB). Fiscal worries entail more two-sided risks for US debt, even though current United States Treasury (UST) yields are not far away from interesting entry points. The US dollar is set to weaken further, though.

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