- Friday 01 August 2025
The past 12 months have reminded us that markets are rarely smooth sailing. For investors, it’s been a year marked by sharp swings, political headlines, and changing economic currents. Here are the key themes we’ve been watching and what they mean for your portfolio.
The “Trump Bump” and Tariff Turbulence
Markets began the year with strong momentum, with U.S. equities hitting new highs in February. Optimism around a new U.S. administration boosted confidence- the so-called “Trump bump.” But this was quickly followed by turbulence, as the announcement (and then pause) of tariffs sent markets into sharp swings.
- In early April, the S&P 500 dropped more than 10% in just two days, its steepest fall since the pandemic.
- Just a week later, when a pause on tariffs was announced, stocks surged back more than 8%.
This back-and-forth showed how quickly sentiment can shift when politics and policy collide.
Inflation and Interest Rates
The U.S. Federal Reserve kept interest rates steady, but inflation has proven sticky staying above the Fed’s 2% target. Meanwhile, bond yields hovered above 4%, reflecting an environment of “sound money” where real interest rates remain positive. For investors, this means bonds are once again delivering meaningful income, something we haven’t seen consistently in more than a decade.
Global Markets and the Stronger Case for Diversification
For euro-based investors, the weaker U.S. dollar meant that U.S. stock gains didn’t translate as strongly at home. In fact, non-U.S. developed and emerging markets outpaced the U.S. — a reversal of the pattern we’ve seen in recent years.
- Value stocks outperformed growth.
- Large caps fared better than small caps.
- Gold surged in dollar terms, but history reminds us it hasn’t consistently delivered as an inflation hedge.
This reinforces a core principle of long-term investing: global diversification matters. Returns don’t always come from the same place, and spreading exposure helps capture opportunities wherever they appear.
Looking Ahead
The tariff story isn’t over. Effective rates are likely to rise, potentially slowing growth while adding upward pressure to prices. At the same time, high U.S. deficits and demographic pressures suggest that higher interest rates may be with us for the foreseeable future.
For investors, this means:
- Expect more volatility than we’ve grown used to in recent years.
- Keep portfolios globally diversified to balance risks.
- Focus on the long game rather than short-term swings.
Our View
If 2025 has shown us anything so far, it’s that markets can move sharply in both directions . What matters is having a resilient plan: one that’s diversified, aligned to your goals, and built to weather uncertainty.
