May was a much better month for markets. After a rocky start to the year, confidence among consumers improved and global trade tensions, especially between the US and the EU, started to ease. Investors took this as good news and share prices around the world went up.

Even the unpredictable back-and-forth on trade policy from US President Trump didn’t seem to rattle markets much this time. People are getting used to waiting to see what actually happens, instead of reacting to every headline.

How did markets perform?

– Global shares rose strongly, with the US market doing especially well.

– Emerging market stocks (from countries like Brazil, India, and China) also did well, partly because the US dollar lost some strength, which helps these markets.

– Bonds (loans to governments or companies that pay interest) didn’t do as well, with prices slipping a little.

– Commodities like oil and metals fell in price. Even gold, which people usually buy for safety, dropped slightly as investors became more comfortable taking risks again.

What’s going on in the global economy?

The world economy is in the middle of some big changes. Countries are rethinking who they trade with and how much they rely on others. That’s creating uncertainty — and markets don’t like uncertainty.

While no one can predict exactly how things will turn out — like what future tariff levels will be or when interest rates will change — some trends are becoming clearer. For example:

– Trade barriers like tariffs are probably going to stay higher than they used to be.

– US immigration is likely to stay lower, which may slow growth but increase wages.

As a result, we expect the US economy to grow more slowly and prices to rise faster than earlier predictions. Still, the US stock market could keep climbing if trade issues are resolved and business regulations are loosened.

What about the rest of the world?

While the US has been making most of the headlines, other big moves are happening globally:

– Germany is stepping up. The government is increasing spending on infrastructure and defence, which should boost Europe’s economy.

– China is also spending more to support its economy, especially in housing and consumer sectors.

– In both cases, this extra government support could make their economies more resilient even if global trade remains shaky. 

What are central banks doing?

Central banks — the organizations that manage interest rates — are trying to figure out how to respond:

– In the US, the Federal Reserve (Fed) is being cautious. While some data shows the economy is slowing down that could justify rate cuts, it is likely that US rates will stay on hold for a while longer. But if things get worse, they could cut rates aggressively.

– In Europe, the central bank has already started cutting rates to help consumers and businesses.

– Japan, on the other hand, is going in the opposite direction. They may raise rates later this year, which could strengthen their currency (the yen).

What should investors think about?

Even with all the uncertainty, we believe there are good reasons to look beyond the US for investment opportunities. Non-US markets — especially in Europe and Asia — could perform well from here.

This remains a smart time to remain diversified, meaning:

– Investments spread across different countries and industries.

– Avoid putting too much into any one market, especially one as uncertain as the US right now.

It’s still a wild ride

The first half of 2025 has been full of surprises for investors, and the second half likely won’t be any different. Trade policies, interest rates, political changes and geopolitical tensions are still in flux.

But by staying diversified and keeping a long-term view, investors can manage the bumps along the way — and may even benefit from unexpected opportunities.

Kind regards,

iPensions Wealth Team

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