Monthly Review - June 2025
- 07 July 2025 (5 min read)
In brief
The markets
5.0%
-1.1%
-0.7%
-1.2%
-0.4%
-1.1%
-0.1%
-0.6%
1.8%
Source: Bloomberg 30.06.2025, returns in local currency
Top stories
Tensions boil over
Conflict in the Middle East resulted in US military action, before a ceasefire was declared between Israel and Iran. The oil price, often a bellwether of regional tensions, jumped by 15% before falling back again. Investors shook off fears of an escalation, perhaps driven by the FOMO (Fear of Missing Out) that has propelled markets. The S&P 500 hit an all time high and the US Treasury bond markets were calm. Nonetheless, the risk of stagflation, or slower growth and higher inflation, appeared to have risen. World Bank economists joined others in cutting growth expectations.
Wait and see mode again
Speaking in Congress, the US Federal Reserve (Fed) chair Jay Powell commented that “uncertainty has diminished”, referencing a de-escalation of the trade war between the US and China. Nonetheless, opinion among Fed governors was split as to whether any tariff related inflation shock would be transitory or more persistent. Indeed the cost of imported electrical goods such as fridge freezers began to creep higher, as tariffs on steel came into force. But President Trump, impatient with the pace of policy moves, called for big rate cuts and asked whether he could appoint himself as Fed chair.
End of the affair
Tesla founder, Elon Musk, left his role at the head of DOGE (Department of Government Efficiency). His unlikely ‘bromance’ with President Trump had earlier been strained by the president's reluctance to maintain subsidies on electric vehicles (EVs). But the final straw came with the president's threat to terminate government contracts with Musk's companies. The breakup, played out on social media, was both public and acrimonious. Musk can now focus on calming the gyrations in Tesla's share price, as well on ever increasing competition from Chinese EV manufacturers, such as BYD.
AI drives renewables growth
Long term investors in US renewables remain attracted by the opportunities created by accelerating electricity demand, despite the fact that President Trump's ‘Big, Beautiful Bill’ targets existing clean energy tax credits. While developing industries such as offshore wind and residential solar might struggle without government subsidies, mature technologies like onshore wind and battery storage are primed for growth. Crucially, wind, solar and storage are cheaper and quicker to deploy than traditional energy sources like natural gas. This could help to meet the surging demand for energy in the US, from AI data centres and onshoring manufacturing.
On the radar
Oil markets are set to remain transfixed by Middle East developments, monitoring any escalation in tensions carefully. Economists will in turn be vigilant as to a knock on effect for inflation, if the price of oil spikes again, adding to the possible inflationary impacts of US trade tariffs.
Trump's 90 day reciprocal tariff pause comes to an end on 8 July. Hopes of trade talks at the recent G7 summit were dashed when Trump left early, leaving investors and businesses wondering what happens next. A further pause might be agreed to allow more time for negotiations.
US employment data has remained solid, despite the talk of heightened US recessionary risks when President Trump unleashed his ‘Liberation Day’ tariff offensive in early April. Will tariff-related uncertainty finally become evident in US jobs data over the summer?