Market & Strategy Update - Q3 2025
- groupepleion
- Jun 26
- 4 min read
In the latest edition of our Quarterly Market & Strategy Update:
Executive summary
Economy
US trade policy rocked global confidence in Q2, triggering growth concerns on the back of slumping business and consumer sentiment. Following Trump’s abrupt pivot, the consensus expects a benign tariff outcome. US economic growth has so far been resilient, possibly due to demand frontloading. Minor cracks have started to emerge, but a recession is unlikely with deficit reduction likely off the table. EU, fiscal spending and supportive credit growth continue to point towards reflation. In China, incremental monetary and fiscal policy support keep the economy on a moderate upward trajectory. Falling inflation has allowed central banks to cut rates, except at the Fed, which remain on hold. Going forward, several factors point to a possible reacceleration of inflation.
Equities
Global equities have roundtripped in Q2, as Trump’s turnaround on trade and fiscal policy reduced the odds of a recession. Investors are now expecting a benign outcome on trade, which increases downside risks in Q3 given the unpredictable US administration. This is particularly relevant for US equities, where valuations and EPS estimates remain high. Despite a strong tech stock recovery, other sectors keep leading, and US equities remain laggards. This dynamic should continue, as global investors reduce their allocations to US assets. The environment of stable yields, a weak USD and low energy prices is supportive of risk assets, and a correction during summer would constitute a buying opportunity, particularly outside of the US, assuming no major trade or fiscal changes.
Bonds
Decelerating inflation and growth concerns have kept a lid on yields, overwhelming worries around debt refinancing. In the US, early signs of a growth soft patch could extend downward pressure on yields in the short-term, but with fiscal rectitude off the table and large refinancing needs seeing declining foreign interest, extending duration remains unattractive beyond 3-4 years. In the EU, large fiscal spending and odds of continued reflation should push long-term yields higher. Credit spreads have come back down to levels that make excessive credit risk unwise. The weak dollar environment is particularly favorable to emerging market debt, as local currencies see appreciating pressure and central banks have room to cut rates from the current elevated levels.
Currencies
The USD has remained under significant pressure. Countertrend rallies triggered by the bearish consensus are possible and should be faded. The USD remains richly valued and many factors point to a durable downtrend.
Commodities
Commodities have been a mixed bag in Q2, with energy prices whipsawing between supply increases and geopolitical tensions. Other commodities have fared better. With trade disruptions, geopolitical tensions and sticky inflation a possibility, tactical exposure to commodities is appropriate.
Precious metals
Gold remains in a major bull market, driven by central bank purchases. Western investor interest has picked up but remains muted and not indicative of a top. Pullbacks should be bought. Other precious metals are also showing signs of strength.
To read our complete Market & Strategy Update for this quarter
Disclaimer
This document has been prepared using sources believed to be reliable but should not be assumed to be accurate or complete. The statements and opinions it incorporates were formed after careful consideration and may be subject to change without notice. The author and distributors of this document expressly disclaim any and all liability for inaccuracies it may contain and shall not be held liable for any damage that may result from any use of the information presented herein. Past performance is not indicative of future results. Values of an investment may fall as well as rise. This document is intended for information purposes only and should not be construed as a recommendation, an offer or the solicitation of an offer to buy or sell any investment products or services. The use of any information contained in this document shall be at the sole discretion and risk of the user. Prior to making any investment or financial decisions, an investor should seek individualised advice from his/her financial, legal and tax advisors that consider all of the particular facts and circumstances of an investor's own situation.
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