Market Commentary 2nd Quarter 2025
At the beginning of the second quarter, global equity markets came under pressure following the announcement of new import tariffs by the United States on «Liberation Day». As outlined in our previous quarterly report, President Donald Trump’s tariff measures are aimed at reshoring manufacturing activity and narrowing the U.S. trade deficit. In response to these announcements, the price of gold surged noticeably, reaching a new all-time high, while economically sensitive sectors, such as energy and financials, saw significant sell-offs. Particularly notable were the developments in the currency and fixed income markets: On one hand, yields on U.S. Treasuries rose sharply, reflecting a temporary erosion of investor confidence in U.S. creditworthiness. On the other hand, the U.S. dollar weakened steadily over the course of the quarter.
Business Activity and Global Economy
At the beginning of the second quarter, global equity markets came under pressure following the announcement of new import tariffs by the United States on «Liberation Day». As outlined in our previous quarterly report, President Donald Trump’s tariff measures are aimed at reshoring manufacturing activity and narrowing the U.S. trade deficit.
In response to these announcements, the price of gold surged noticeably, reaching a new all-time high, while economically sensitive sectors, such as energy and financials, saw significant sell-offs. Particularly notable were the developments in the currency and fixed income markets: On one hand, yields on U.S. Treasuries rose sharply, reflecting a temporary erosion of investor confidence in U.S. creditworthiness. On the other hand, the U.S. dollar weakened steadily over the course of the quarter.
Ultimately, President Trump reversed his trade stance temporarily until July 9, likely due to concerns over rising refinancing costs for government debt. This unexpected policy change triggered a sharp rally across global equity markets. As the quarter progressed, the United States also reached a preliminary trade agreement with the Chinese government, further supporting the recovery in global markets. Consequently, U.S. equity indices once again reached record highs by the end of the quarter.
In Europe, aside from developments in U.S. trade policy, investor focus shifted toward domestic political changes in Germany. With Friedrich Merz taking office as the new Chancellor, the German government announced plans to stimulate economic growth through infrastructure investment and deregulation. These initiatives were announced at an opportune moment, as Eurozone inflation declined to 2% in Q2 2025, prompting the European Central Bank to cut its key policy rates twice, bringing the benchmark interest rate down to 2%.
Toward the end of the quarter, geopolitical tensions in the Middle East briefly dominated market sentiment, following an Israeli strike on Iran and subsequent U.S. airstrikes targeting Iranian nuclear facilities. As a result, oil prices spiked significantly before the situation quickly de-escalated. With tensions easing, investor attention has been refocused on July 9, as a key date that may provide greater clarity on the future direction of U.S. trade policy.
Read the full report here: