Some of our clients enjoy keeping up with how investments have performed over the last quarter. This market commentary is designed to provide a summary of key developments across global markets, including equities, bonds, and economic trends.
While the content is more technical in nature and may appeal most to those with an interest or background in investing, we hope it offers useful insights for anyone curious about how current events are shaping financial markets.
Overview
The second quarter of 2025 proved to be a volatile period for global markets, driven by a combination of political uncertainty and rising geopolitical tensions. Despite these challenges, most major asset classes delivered positive returns.
Key moments of the quarter:
- Trump’s “Liberation Day” tariff announcement triggered a sharp market selloff in April, which recovered quickly
- Conflict between Israel and Iran added to global uncertainty, but the overall impact on markets was limited.
- After a weaker start to the year, the US tech giants bounced back after strong earnings results.
Equities
In early April, President Trump announced a 10% base tariff for every country along with reciprocal tariffs targeting those countries which were deemed to have been taking advantage of the US. The announcement triggered a sharp selloff across global markets, particularly US equities. However, the U.S. administration responded to the market reaction, announcing a 90-day pause on the proposed reciprocal tariffs. This helped to calm investor nerves, and investments like shares, recovered quickly.
The US tech giants staged an impressive comeback in Q2, led by Nvidia, Microsoft and Broadcom which posted strong Q1 earnings in May. This was off the back of a negative first quarter for the year. That said, political uncertainty in the US remains elevated, and the dollar has lost some strength, which may begin to challenge the dominant run we’ve seen from US markets.
After a strong start to the year, UK and European markets lost some momentum in Q2 when measured in local currency terms. But with the US dollar softening, these regions could look more attractive to global investors aiming to diversify away from the US. Whilst tariffs pose a threat to Europe, an increase in fiscal spending could help support growth. Closer to home, the UK economy remains challenged in 2025. Even so, UK stocks remain notably undervalued compared to global peers. The recent wave of merger and acquisition activity in the UK is a clear sign that investors are spotting value in British businesses.
Bonds
In developed markets, inflation pressures have cooled but they haven’t completely gone away. As a result, central banks are proceeding with caution. Inflation remains above central bank targets, so any cuts to interest rates are being delivered slowly and deliberately.
In Europe, the European Central Bank (ECB) has made two moves so far this year — cutting rates in both April and June. That’s helped European government bonds perform relatively well, offering a boost to fixed income investors.
Across the pond, the US Federal Reserve is still holding steady. With unemployment low and wage inflation a lingering concern, they’ve opted to pause for now. That’s kept US government bonds fairly flat, although yields have been moving higher at the long end of the curve. Investors are increasingly uneasy about the growing US debt load and the political noise surrounding it. The current administration will want rates cut to ease the cost of servicing that debt, but the Fed is standing firm on its independence will inflation its priority.
In the UK, the Bank of England reduced the interest rate from 4.50% to 4.25% in May, remaining particularly cautious of the jobs market and wage inflation.
Outlook
The second quarter of the year reminded investors just how quickly things can shift. The announcement of new US tariffs in April rattled markets and served as a reality check — a sign that the era of uninterrupted US market dominance might not last forever. That said, we still see plenty of strength in US companies, particularly in the tech sector and other high-quality names.
Looking ahead, volatility is likely to remain a theme. Ongoing political uncertainty and central bank policy make for a choppy environment. We see this as a reminder of the value of diversification. In markets like this, having a well-balanced portfolio across regions and asset classes can help smooth the ride. Despite some of the headlines, long-term investors are best served by consistency, not reaction.
Conclusion
We understand that not everyone finds market updates helpful, and that’s okay. The purpose of this commentary is to support informed decision-making and provide transparency around the factors influencing investment performance. If you have any questions or would like to discuss how these developments relate to your own financial plan, please don’t hesitate to get in touch.
Disclaimers
This commentary is for general information only and does not constitute personal financial advice. You should seek advice tailored to your individual circumstances before making any investment decisions.
Past performance is not a reliable indicator of future results. Investments can go down as well as up.
Market conditions can change rapidly. The views expressed are based on current market conditions and may change without notice.
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