Monthly House View
04.06.20253 min
Monthly House View June – Calm returns to financial markets in May
The debate around tariff rates remains intense, but financial markets have experienced a period of relative calm, largely thanks to what some are calling the ‘TACO pattern’ - Trump Always Chickens Out. Many of the measures announced on the so-called 'Liberation Day' (April 2nd) have since been reversed or altered.
The Monthly House View is published each month. This publication is the result of a close collaboration between Bank Degroof Petercam and Indosuez Wealth Management, offering you a comprehensive analysis of market trends and developments.
Despite this, trade policy remains uncertain, especially after a court ruled that President Trump does not have unlimited authority to impose sweeping tariffs. All eyes are now on the Court of Appeal (and possibly later the Supreme Court) to see whether it upholds this decision.
An ambitious yet deficit-laden budget
The Trump administration has now turned its attention to budget negotiations, with President Trump pushing hard for the approval of his so-called “Big Beautiful Bill Act.” While Republican discussions are still underway, one thing is already clear: there’s little sign of fiscal restraint.
The proposed budget continues to follow an expansionary path, which will further swell the federal deficit. It has long been apparent that the U.S. budget needs serious reform—particularly given rising interest payments and the growing costs associated with an aging population. For now, however, such corrective action remains absent. Meanwhile, the bond market is watching the situation with increasing concern.
Rising long-term rates and a cautious Fed
Budget uncertainty is keeping long-term government bond yields elevated and market volatility high. The Federal Reserve finds itself in a delicate situation: it’s difficult to pursue monetary easing while fiscal and trade policies threaten to fuel inflation.
As noted in Bénédicte Kukla’s macroeconomic analysis, the Fed is monitoring the inflationary impact of tariffs very closely. Ongoing budget debates only increase the need for vigilance. That said, disinflation seems to be taking hold—particularly in the services and housing sectors—paving the way for two potential rate cuts later this year. Time and data will tell. In our diversified portfolios, we continue to limit interest rate sensitivity and prefer bonds issued by creditworthy institutions
Tactical shift in U.S. equities
We’ve taken advantage of the recent stock market rally to slightly reduce our exposure to U.S. equities. This tactical adjustment helps us manage risks in an increasingly unpredictable political environment.
Still, we maintain a substantial position in U.S. stocks, which remain supported by strong fundamentals—most notably, the superior profitability of U.S. companies relative to other regions. With positive earnings growth and the potential for lower policy rates, 2025 could still be a strong year for U.S. equities.
Favoring Europe and emerging markets
In our asset allocation, we currently favor European and emerging market equities. These markets continue to trade at a significant discount compared to the U.S.—around 30% for Europe and 40% for emerging markets. However, political uncertainty in the U.S. could narrow that gap over time.
Dollar overvalued, gold gaining appeal
In the currency markets, we maintain a cautious medium-term outlook on the US dollar. As Lucas Meric points out, valuation indicators from the Bank for International Settlements (BIS) suggest that the dollar remains historically overvalued relative to major trading partners. This continues to be a concern for U.S. Treasury Secretary Scott Bessent, who has expressed a preference for a weaker dollar. On the other hand, we remain optimistic about the outlook for gold.
Unlisted assets remain attractive
Unlisted assets continue to present compelling opportunities. In this edition, Matthieu Roumagnac explores the rising interest in private debt, with a particular focus on the semi-liquid fund segment. These types of debt instruments offer valuable tools for further portfolio diversification.
