Q2 Market Commentary 2025

The second quarter of the year brought a significant amount of volatility across markets as concerns around the US trade policy and events in the Middle East increased. Both have eased from mid-April onwards and at this point most economies remain robust, we will continue to monitor any further changes.

The initial proposed tariff announcements were larger than many market economists had been predicting and, as such, in the first few weeks of April, markets fell. Markets then rallied as a 90-day pause was put in place and an initial framework between the US and China was announced and implemented. As the quarter came to an end, we saw some deals being agreed and further negotiations continuing with others. In addition, we saw continued discussions around President Trump’s “Big Beautiful Bill” proposals that were in the election campaign manifesto pledge which aims at proving further tax cuts and extending existing ones for both corporates and individuals which is to be offset in part by spending cuts in other areas.

The domestic market

The UK market, as measured by the MCSI UK IMI index, was up by 3.22%. For the companies with foreign revenue, this has been helpful, particularly in the large cap names. Corporate earnings on the whole remain resilient, whilst mergers and acquisitions have picked up this year from a variety of sources proving value within the UK market and flows from overseas have started to return. The consumer remains in a reasonably resilient place and, should inflation and rates start to fall, this should be helpful.

What about the USA?

The US market has strong returns with the Artificial Intelligence (A.I.) related names recovering the Q1 falls, supported by corporate earnings for Q1. The tariff 90 day pause also helped ease market sentiment. We continue to monitor details as and when they come out and continue to engage with our active managers on how companies are adjusting should plans come into practice.

What’s happening in Europe?

In Europe, shares were strong particularly in the areas of industrials and real estate. Within industrials, the defence stocks were boosted as further agreements at the NATO summit continued to help returns in this sector. The increased fiscal spending and continued falling inflation, as well as further monetary loosening should be supported but, again, we will monitor the potential trade tariffs and the implications of these for the strategies we hold. It should also be noted that whilst European business may suffer US tax on exports to the US, companies with factories in the US will not.

ASAM’s Outlook

Looking at the investment outlook for the long term, we continue to focus on fundamentals and what drives investment returns over investment time frames. Over the last twelve months, we have seen indiscriminate moves across markets, sectors, and individual companies which are short-term and lacking fundamental support. In the West, rates are now being cut as inflationary pressures ease, providing greater stability. We cannot rule out further volatility in the short term due to several reasons. Many short-term market movements are sentimental and reactionary without long-term consideration of how individual companies are performing and adapting to the economic environment. The dislocation in markets presents opportunities for active management

This information is obtained from sources considered reliable, but its accuracy and completeness is not guaranteed by Anderson Strathern Asset Management Limited. Neither the information nor any opinions expressed constitute financial advice. Investments can fluctuate in price, value and/or income and may return less than the original amount invested. Past performance is not necessarily a guide to future performance. Anderson Strathern Asset Management Limited is authorised and regulated by the Financial Conduct Authority.

We’re here to help

Fill in the form above or call us on 0131 270 7700 and a member of our expert team will get back to you.