As summer approaches, markets find themselves navigating a mix of storm clouds and clearing skies. The sharp rebound following “Liberation Day” has shown the resilience of equities, led by the S&P 500, even as policy uncertainty and geopolitical risks linger. With US inflation cooling, the Federal Reserve (Fed) turning dovish, and global trade tensions easing, opportunities are emerging amid the volatility. In this special summer outlook, we explore the key risks, opportunities, and strategies to help you stay ahead in an unpredictable landscape. Buckle up—this season promises to be anything but dull.
In a nutshell, our key takeaways:

• After experiencing a sharp decline during “Liberation Day”, equity markets, led by the S&P 500, rebounded thanks to easing trade tensions and the resilience of US economic data. However, political uncertainty remains elevated.
• The US dollar continues its downward trend.
• Recent economic indicators have alleviated fears of a pronounced slowdown. However, the US economy remains caught between signs of labour market deceleration and stronger-than-expected output figures.
• US inflation has been weaker than expected for four consecutive months, despite the introduction of new tariffs. In our view, these tariffs are unlikely to significantly impact inflation until the second half of 2025, when we anticipate a temporary rise above 3%. This is expected to have limited second-round effects on wages.
• Against this backdrop, we believe the Fed will adopt a more accommodative stance. We forecast two rate cuts in 2025 and two additional cuts in 2026, bringing the upper bound of the Fed Funds rate to 3.5% by the end of 2026.
• Looking ahead, we anticipate 2025 to be another strong year for equities, supported by economic resilience and monetary easing. That said, summer risks remain: tariff uncertainty (9 July), central bank meetings (mid-July) preceded by US inflation and employment data, and geopolitical tensions surrounding Organization of Petroleum Exporting Countries (OPEC) and World Trade Organization (WTO) meetings in July, all of which could increase market volatility in the coming weeks. As a result, we favour strategies to either mitigate volatility (e.g., investments in gold, high-quality bonds, or structured products) or capitalise on it when the timing is right (e.g., maintaining liquidity).
• We favour European and emerging market equities, which, in our view, currently have greater fiscal and monetary flexibility. Additionally, we remain constructive on European credit, supported by strong fundamentals and attractive spreads.

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