Investment Monthly
Market resilience amid uncertainty
07 August 2025
Key Takeaways
- US tech stocks are performing well amid strong profits and renewed AI enthusiasm. But valuations remain a challenge and with US growth cooling, we maintain a relative preference for markets outside the US
- China’s policy put is a ready-made market catalyst. With sectors like technology building momentum, this continuing policy boost can potentially drive returns both locally and across other emerging markets
- A regime of “deficits forever” and a cautious Fed could keep US Treasury yields sticky. Investors should seek out alternative portfolio diversifiers
- Portfolio resilience can be built with ”safety substitutes” including European fixed income and selective high-quality public and private credits
Macro Outlook
- Despite some progress on US trade deals, policy uncertainty remains elevated, which can trigger market volatility. For now, markets are in wait-and-see mode in assessing the economic impact of tariffs
- Premium growth opportunities lie in emerging markets, where falling inflation and a weaker US dollar is allowing central banks to cut rates
- Trade disruption is likely to have diverging effects on Asian economies, but growing intra-Asian trade links provides a structural boost to growth
- As US exceptionalism fades, a regime of G-zero economics is emerging – characterised by a fragmentation of global leadership, along with supply shocks, constrained growth, and high and volatile inflation
Policy Outlook
- Despite two dissenting members, the US Fed's FOMC voted to keep rates on hold in July. We expect further gradual policy easing later this year
- The ECB policy rate may move into accommodative territory later this year. German fiscal stimulus is likely to support growth in 2026
- Growth concerns, benign inflation, and USD softness in 2025 aid the case for more monetary easing and fiscal support in EM Asia, but policymakers are likely to remain agile and cautious
- Macro policy remains supportive in China with a focus on structural rebalancing and long-term strategies, such as supply-side reforms, services consumption, technology & innovation, and sustainable urbanisation