Monthly Review - May 2025
- 04 June 2025 (5 min read)
In brief
The markets
6.2%
2.1%
6.6%
4.0%
6.7%
6.5%
3.3%
1.6%
5.0%
Source: Bloomberg 31.05.2025, returns in local currency
Top stories
Who blinked first?
The tariff war briefly de-escalated, after retaliations between the US and China were temporarily scaled back. It is not known who called it, but a meeting in Geneva was attended by both parties, after the squeeze on imports was felt at major ports. The situation later re-ignited, however, when the US threatened 50% tariffs on the European Union. Unsurprisingly, an index of trade uncertainty has gone through the roof. Meanwhile, US retail giant Walmart confirmed prices will be rising in June, despite being instructed to “eat the tariffs” by the US president.
Not big and beautiful
In the US, market attention pivoted from trade tariffs to President Trump’s “Big, Beautiful Bill”. The bill, to be delivered on the 4th of July, covers tax and welfare cuts, as well as new spending plans. It will potentially add $3 trillion to US government debt, prompting Moody’s to cut the rating of US credit. The IMF (International Monetary Fund) called on the US to reduce its already bloated debt burden. And Elon Musk, formerly leader of the government’s cost-cutting drive, criticised the plan for undermining his efforts, claiming a bill could be big or beautiful- not both.
The race of power
Chinese electric vehicle (EV) battery giant CATL raised $4.6 billion in Hong Kong, coinciding with a temporary truce in the US/China trade spat. The CEO predicted that by 2028 half of all new trucks sold in China will be electric-powered, sending shockwaves through the global market for heavy goods vehicles. CATL has now overtaken its main rival for battery charging speed, promising a range of 520 km for 5 minutes charging, versus BYD’s 470 km. Meanwhile, the ‘rat race’ in EV pricing hotted up in China, as BYD slashed the ticket on its entry level car to 75% below the price of the equivalent Tesla.
A more healthy attitude
A growing generational divide on attitudes towards alcohol has significant implications, not only for drinks manufacturers, but potentially also for future population health. In part, this divide appears to be driven by younger generations’ rising awareness of the health risks of alcohol consumption. A 2024 Gallup poll found 65% of US 18 to 34 year olds thought “one or two drinks a day” was bad for health, more than double the percentage in 2000. Alcohol sales are reflecting this bifurcation. Inflation adjusted alcohol spending by under 25 year olds slumped more than 60% between 2003 and 2023, while alcohol spending for US residents aged 65-74 and 75+ increased by 50% and 72% respectively.
On the radar
Inflation expectations have surged due to the impact of trade tariffs. So far, the job market has remained resilient, with private sector growth outstripping federal job losses.
The US president’s TACO (Trump Always Chickens Out) approach to trade looks set to continue. Having recently threatened to impose 50% levies on EU imports, Trump later said he would delay the implementation until early July to allow for trade talks.
Long dated bond yields are moving higher on fears of sharply higher issuance. This trend, which has been particularly pronounced in the US and Japan, has been driven by concerns over ballooning budget deficits. In contrast, eurozone bond yields have been more stable.