Welcome to our June 2025 Marketing Commentary. You’d be forgiven for thinking the global markets had finally taken a breather. After the chaos of April – tariffs flying, markets flailing, and Trump dominating every financial headline – May felt almost… calm. But blink and you’ll miss it. Underneath the surface, the tensions haven’t gone away – they’ve just been temporarily muzzled.

So, what actually happened last month? Let’s walk through the key moves, starting with the usual suspect.

America’s Bouncing Back – But Only Just

US markets came out swinging in May. The S&P 500, Nasdaq, and Dow all posted healthy gains as if trying to erase the memory of April’s tantrum. But don’t get too comfortable – this isn’t a comeback story, it’s a pause in a much longer argument.

Trump’s decision to put his “Liberation Day” tariffs on ice for 90 days gave markets the breathing room they desperately needed. Investors welcomed the ceasefire, especially with the China trade spat showing faint signs of cooling.

Add to that some soothing words from Federal Reserve Governor Christopher Waller – who said short-term inflation from tariffs shouldn’t mess with interest rate policy – and you’ve got a recipe for cautious optimism. His comments in Seoul were like a warm blanket for nervous traders, especially as April’s inflation numbers showed progress towards the Fed’s 2% target.

But here’s the rub – the tariff drama hasn’t gone away, it’s just been filed under “pending.” Tariffs with staggered timelines and sketchy legality are still lingering in the background like unpaid parking tickets. And over in the bond market? Things look a lot more anxious.

Jamie Dimon (JP Morgan Chase CEO and general straight-talker) said the US bond market might “crack” under the weight of mounting government debt. And he’s not alone. Moody’s downgraded the US credit rating in May, spooked by Trump’s One Big Beautiful Budget Bill, which could pile on another $3.3 trillion in debt by 2034.

Foreign investors, especially from Asia, have started backing away from US bonds. And with Japanese investors now shifting money back into local government bonds – which are offering attractive yields again – we could see even more trouble brewing.

So while Wall Street’s smiling for now, Main Street’s got a growing debt problem, and the Fed’s walking a tightrope.

The UK: Green Shoots and Gritted Teeth

Back on home turf, the FTSE 100 had a good month, closing May just shy of 8,800. Defence and energy stocks saw a decent lift, buoyed by government investment and public spending.

But look a bit closer, and there’s a familiar mix of cautious optimism and thinly veiled worry.

The Bank of England dropped interest rates to 4.25%, with a divided committee sending mixed signals about what comes next. Inflation threw a bit of a tantrum in April, climbing to 3.5%, largely due to a massive jump in airfares over Easter (up 27.5% from March, if you can believe it).

That unexpected blip has muddied the waters for a possible rate cut in June. New MPC member Alan Taylor wanted a sharper cut, but rising prices may cool that idea off quickly.

Meanwhile, Prime Minister Keir Starmer made some headline-grabbing moves with new trade deals. Agreements with India, the US and the EU all landed in May – not without their critics, of course. Concessions like letting European trawlers fish in British waters or opening the door to American beef and ethanol imports raised eyebrows.

But here’s the truth: the UK is a midsize player now, dealing with three trading giants – the US, the EU, and China – on its own. These deals may not be perfect, but they’re realistic. Britain’s no longer part of a big bloc, so it’s now playing chess without the queen.

Europe: Rate Cuts and Resilience

Over in Europe, the ECB decided to keep trimming rates, cutting them down to 2.0% in May. With inflation easing to 1.9%, and economic momentum looking a bit sluggish, the move made sense.

Markets are now bracing for more cuts in June and July.

Tariff worries still linger in Brussels, too, especially with Washington rewriting trade rules on the fly. But so far, the Eurozone has held up better than expected. The OECD stuck with its growth forecast of 1% for 2025, and Eurozone inflation seems largely under control.

There was a worry that early-year export growth was just a rush to ship goods before tariffs kicked in. But the data tells a more nuanced story. France didn’t show signs of this, Spain saw only a small bump, and in Germany, growth came from a blend of exports, investment, and local spending.

So, while the US-China row continues to dominate headlines, it hasn’t knocked Europe off its feet – yet.

Far East: Breathing Room, But Not for Long

China’s economy got a welcome pause in May. The 90-day halt on tariffs gave businesses room to regroup, and export numbers started looking less bleak.

Exports to the US fell sharply – down 21% year-on-year in April – but shipments to other Asian countries jumped 22%. This raised suspicions that goods may be getting quietly rerouted through third countries to dodge tariffs. Not exactly subtle, but certainly effective – and not a new trick, either.

Over in Japan, yields on 40-year bonds hit an all-time high, making local debt suddenly far more appealing. Japanese investors, who’ve long been massive buyers of US bonds, are now pulling back – and that shift could ripple out well beyond Tokyo.

If capital keeps flowing out of the US and back into Japan, it may pile even more pressure on already wobbly American debt markets.

Emerging Markets: Caught in the Middle

Emerging markets have had a mixed time. The pause on tariffs helped steady things, especially in places like India and Brazil, where strong domestic demand has helped cushion the blow.

Mexico, heavily tied to US exports, is still in a more precarious spot – its trade exposure is far greater than, say, Africa’s, which sends just 1% of its exports to the States.

A softer US dollar has also made life easier for many emerging economies, especially when it comes to paying off debt priced in dollars. But that could change fast if the US fiscal picture continues to unravel.

So, What Next?

May gave investors a break. Markets rebounded, interest rates edged down, and trade tensions stopped spiralling for a moment. But don’t mistake calm for clarity.

Trump’s tariff strategy is still unresolved. The US debt problem is ballooning. And central banks are running out of options. Europe’s managing. The UK’s muddling through. And emerging markets? They’re surviving – for now.

The “One Big Beautiful Bill” might make for dramatic headlines, but it’s already drawing fire from unlikely allies, including Elon Musk, who branded it a “disgusting abomination.” Strong words, and probably a taste of more political drama to come.

So enjoy the calm while it lasts. The next storm might not be far away.

Sources Market data

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