June 2025 monthly investment news

Progress in US trade negotiations with the European Union and a temporary delay in planned tariff hikes helped mitigate recession fears and boosted market sentiment. The month saw a notable shift back into risk assets, with equities and high-yield credit rallying following the partial rollback of tariffs announced on ‘Liberation Day’.

In the US sovereign bond yields rose, indicating falling prices, amid growing concerns over debt sustainability. Commodities were the worst-performing asset class, as improving risk appetite reduced demand for defensive assets. Despite some positive developments, the outlook remains finely balanced due to elevated inflation and mounting fiscal vulnerabilities.

Market activity

At the beginning of May, we allocated from short-term government bonds to short-term credit across multi-asset funds. Additionally, we reduced our gold position in the AAA and Prisma funds following the recent strong positive price action and amidst the prevailing ‘risk on’ sentiment in May.

We also decreased long and medium-dated exposures in the Active Asset Allocation fund (AAA) and Prisma funds, with the proceeds invested in short-dated instruments. Towards the end of the month, we reduced equity allocations in managed and multi-asset funds. For example, this brought the allocation in the AAA fund to 35%, compared to its 40% midpoint and 65% maximum. The proceeds were invested in cash for the managed funds and in short-term government bonds for the multi-asset funds.

Equity markets

In May, US equities showed strength, rebounding from April’s downturn. The easing of tariff concerns and robust Q1 corporate earnings contributed to the positive performance. Out of the 11 sectors, 10 ended the month on a high note, with technology and communication services leading gains at 10.3% and 8.8%, respectively. Healthcare was the only sector to decline, recording a return of -3.8%.

Although there was a temporary pause in tariffs between the US and China, tariffs continued to cause volatility globally. President Trump threatened to impose 50% tariffs on the EU starting June 1st. However, negotiations were extended to the original deadline of July 9th. Equities initially dropped due to the tariff threat but later recovered, with Eurozone equities ending positively in May.

Bonds and interest rates

Bond markets experienced volatility in May due to persistent inflation, slowing economic growth, and rising fiscal concerns.

The yield on the US 10-Year Treasury reached as high as 4.6% after the downgrade of the US sovereign credit rating to Aa1. This downgrade triggered a sell-off in longer-dated Treasuries and raised concerns about the long-term sustainability of government borrowing.

European bond markets had a relatively better month, with only modest yield increases in core markets like Germany. During its May policy meeting, the Federal Reserve kept interest rates steady at 4.25%–4.50%, maintaining a cautious approach in the face of persistent inflation and rising unemployment.

Commodities and currencies

In May, gold declined, showing a return of -0.15% in euro terms, as demand for defensive assets decreased on the back of improved sentiment towards riskier assets.

OPEC announced yet another increase in oil production, following two recent increases. However, oil prices rose 4.26% in May due to de-escalation between the US and China on tariffs and increased awareness that low prices pose a challenge to US shale output.

The US dollar weakened against most major currencies, with the yen being a notable exception. By the end of the month, €1purchased $1.1347.