Published: 18/08/2025 By Oliver O'Brien
Q2 Update and Q3 OutlookThis quarter was dominated by significant volatility amidst geopolitical uncertainty but despite this, asset returns proved surprisingly resilient and we enter Q3 on a positive footing.
Markets fell sharply after Trump’s “Liberation Day” tariffs were announced, with the S&P 500 suffering its fifth largest 2 day fall since WW2. Markets quickly rallied after the announcement of a 90 day pause on tariffs and by the end of June, equity markets were once again at all-time highs.
Further de-escalation of the US-China trade war in May further aided positive market sentiment and a solid jobs report in the US in April provided further market relief, although since then the figures have been revised downwards. The Israel-US-Iran conflict threatened further market tension but this too subsided quickly, although oil prices did spike briefly.
The US also continued to be in the spotlight, with ongoing fiscal concerns leading to a downgrading of their credit-rating at the same time as Trump’s “Big Beautiful Bill” was being passed, raising the US deficit further. The US dollar also continues to weaken, continuing the seeming erosion of US exceptionalism.
What are the market impacts?
Equities had a good quarter, with the global index up 9.3%, with strong returns from the US and Japan (11.2% & 8.5% respectively). The UK and Europe posted modest returns of 3% and 2.4%, again respectively.
Fixed income has a positive time despite yields spiking earlier on, these have settled and contributed to global government bonds returning 1.5% and non-government bonds returning c. 2-3%.
Outlook for Q3
Global growth may be tempered by this ongoing uncertainty and tariff-related risks for the latter half of 2025, however it remains surprisingly resilient. While the IMF trimmed its forecast to 2.8%, increasing government/industrial spending and robust corporate earnings continue to buoy markets.
Some of the key things to keep an eye on will be:
- How US policy evolves and interacts with global markets
- Stagflation risk from slowing growth, sticky inflation and tariff impact
- Central banks views & actions on rate cutting
- Whether the US market continues to dominate, amidst a weakening dollar
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