Home Insights Macro views What’s in store for financial markets in the second half of the year?
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Navigating market volatility has certainly been a challenge for investors this year. As fiscal and monetary policy uncertainty remain an overhang for financial markets, separating noise from trend boils down to monitoring U.S. economic fundamentals, such as the state of the U.S. consumer or shifts in the labor market. Moreover, despite structural and cyclical overhangs, investors can position their portfolios to take advantage of growing idiosyncrasies.

This year has been a rollercoaster for markets and investors. The escalating trade tensions in the early spring revived fears of a global recession. Since the U.S.-China trade truce was announced in early May, however, trade concerns seem to have receded for now. Equity markets have almost entirely recouped their losses from earlier in the year.

Aside from the likelihood that trade noise may persist in the months ahead, this recent rally in equities seems to be at odds with the economic backdrop. Though the labor market and consumer spending remain resilient, the data has softened, and there are increasing concerns about sticky inflation delaying the Fed’s plans to lower rates.

Furthermore, should rates rise due to fiscal concerns, this may weigh on the equity market as valuations could get strained. From our perspective, a sustained improvement in the economy hinges on growth-friendly fiscal policies, specifically deregulation and tax cuts. It remains unclear, however, to what extent these measures would offset the impact of tariffs.

Looking ahead, volatility is likely to persist amid unresolved decisions from the administration and a Federal Reserve that is unlikely to cut rates until the data softens. Therefore, investors should consider maintaining a diversified portfolio that emphasizes stability, income, and long-term growth and prepare to adjust to this rapidly evolving environment.

For a deeper dive into tur mid-year market perspectives and implications for investors in the second half of the year, read Mid-year Perspectives 2025: Cutting through the noise.

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