Monthly House View
01.07.20254 min
Monthly House View July 2025: looking ahead to Jackson Hole
As summer approaches, tensions in the Middle East are once again flaring up. Yet, despite heightened geopolitical uncertainty, financial markets appear surprisingly unfazed.
This relative market stability can likely be attributed to the cautious positioning of several key players (including long-term investors) making markets less reactive to negative headlines.
The price of a barrel of crude oil, which often spikes during such geopolitical events, is now lower than it was before the hostilities began. While the risk of a sharp rise in prices cannot be dismissed, particularly if the Strait of Hormuz were to be blocked, our base case remains that further escalation will be avoided.
Surprises possible
Of course, surprises may still emerge as the summer unfolds, but overall, we remain confident in the outlook for equities. For the second half of 2025, we expect the favourable conditions that have prevailed since the start of the year to continue: corporate earnings are still growing—albeit less robustly than in 2024—and central banks remain inclined to cut interest rates.
One element that could produce a surprise and warrants close monitoring is the ongoing negotiation of trade agreements. As Bénédicte Kukla highlights in her article in this edition, more than 200 bilateral deals are currently being negotiated between the United States and its partners.
Risks
A proliferation of such agreements could significantly reshape global supply chains. As The Economist noted in its 14 June edition, this development carries risks: countries may resort to protecting their domestic industries and competing for jobs that no longer exist—ultimately at the expense of wages, productivity, and innovation.
Meanwhile, China continues to dominate the global industrial landscape in the absence of serious competition. On the other hand, these shifts create fertile ground for the formation of cooperative blocs among like-minded, complementary, and resilient nations where free trade could flourish within those alliances.
Budget deficit
Another point of focus is the ongoing budget negotiations in the United States. As we noted in the lead article of our previous Monthly House View, the US government does not appear to be addressing the root causes of its fiscal challenges. As a result, the upcoming budget will likely be expansionary.
However, as Sam Vereecke explains in his article, the current 4.3% yield on US Treasury bonds continues to attract investor interest. This sustained demand helps to contain the risk of a debt trap, at least for now, despite the lack of fiscal discipline.
Positioning
In light of these factors, we remain confident in our strategic positioning, which we summarise as follows:
Equities
We maintain a significant equity exposure. Following partial profit-taking during the late-April to early-May market rebound (to manage portfolio volatility), we stand ready to increase our positions again if a significant correction occurs—depending on market conditions.
Relative valuation
Valuations remain attractive for European equities (trading at a 30% discount to the US) and for emerging markets (at a 40% discount), which should continue to appeal.
Bonds
We favour quality bonds, particularly among top-tier issuers within the euro high-yield segment.
Currencies and commodities
Our short-term view on the US dollar remains cautious, although we recognise its continued role as a safe haven. Gold remains a valuable diversifier and still has upside potential.
Investment themes
We reiterate the five key themes that will shape markets in 2025:
- The acceleration of digitalisation and AI as a driver of earnings growth
- The exceptional resilience of the US stock market
- Asia's growing presence in global portfolios
- The potential of small caps, especially amid reindustrialisation
- The rapid electrification of the economy, supporting energy diversification and the integration of renewables
Finally, central banks continue to play their stabilising role effectively, even in this uncertain environment. In recent years, they have managed to contain inflation without tipping economies into recession.
Jackson Hole
Attention is now turning more sharply towards employment. The Jackson Hole symposium, taking place in Wyoming at the end of summer, is expected to provide valuable insights in this regard. The themes and tone of the discussions will offer investors a window into the thinking of the world's leading economists.
Wishing you an enjoyable read—and a great summer. See you soon.
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