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.
- 11 August 2025
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Login to Standard Life Login to 7IMThe 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.
Over the first quarter of 2025 markets were mixed as a combination of factors took effect. In the US, Donald Trump was inaugurated as President for a second term and quickly set about moving his policies forward.
Donald Trump has looked to address the perceived imbalance in US trade amongst its global trading partners in his announcements on ‘Liberation Day’. This has resulted in a range of import Tariffs on certain goods being imported by the US. The comments and tariffs have led to a correction with global stock markets falling sharply.
In the fourth quarter markets were mixed as Donald Trump’s Republican party won the election and control of both houses in the US. In other markets, nervousness and speculation around Trump’s trade tariffs dented confidence. Over the period the European Central Bank cut rates by a further 50bps, the US Federal Reserve cut by 25bps, and the Bank of England remained on hold as some areas of inflation continued to be higher than the Bank would like.
Over the third quarter, markets on the whole continued to perform well. As central banks reduced rates, the fixed income markets and sectors sensitive to interest rates appreciated in value. Over the period, the European Central Bank cut rates by a further 25bps, and the Bank of England started with a rate cut of 25bps. The Federal Reserve (FED) in the US joined in with a 50bps cut.
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Over the second quarter of 2024, investor focus has remained on inflation and interest rate policy on each side of the Atlantic. Artificial Intelligence has remained at the fore, becoming increasingly prominent in companies plans. While economies globally look fairly robust, corporate businesses and consumers are continuing to see easing of inflationary pressures.
The first quarter of 2024 has remained focused on inflation and interest rate policy on each side of the Atlantic. The previous market view ‘higher for longer’ rotated into a course of easing rates in early January. This view was somewhat diluted over the second half of Q1 while continued resilience in the US employment market and some geopolitical events changed some viewpoints to a more cautionary stance.
Over the final quarter of 2023, inflation and interest rates expectations flipped from the view of ‘higher for longer’ to possible hold or easing. November's inflation data came in lower than forecast and the main central banks held rates unchanged, which fuelled the change in sentiment. This gave a strong boost to markets and, particularly the more interest rate sensitive sectors, such as technology and real estate.
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Over the third quarter to 29th September of 2023, inflation remained elevated in the west with interest rates matching suit. The market narrative in the US flipped from a view of reducing interest rates to them being a higher for longer. The US economy has shown resilience as rates have risen.
Over the second quarter to 30 June 2023, inflation remained elevated in the west. Central banks reacted by increasing interest rates in the UK, US, and Europe. Over the coming period we expect inflation to remain as a key focus.