Market insights

A widening budget deficit and rising debt levels in the US pose a risk to US Treasuries. Therefore, we’ve decided to further reduce our US Treasury exposure and reallocate part of the proceeds to Japanese government bonds and part to US equities.

Last week, we hosted a special webcast on geopolitics with Daniele Antonucci, our Chief Investment Officer, and Anna Rosenberg, Head of Geopolitics at the Amundi Investment Institute. During the webcast, we received many questions from the audience, but didn’t have time to address them all. We’ve answered them below.

Signs of a de-escalation in the Middle East helped calm markets last week, with oil prices falling and market sentiment improving, which supported equities, with the S&P 500 reaching a new record.

The Middle East is still the focus of global markets as the conflict between Israel and Iran continues. The key piece of news is that, over the weekend, the US intervened as well, supporting Israel. Against this volatile geopolitical backdrop, equity markets continued to decline while oil prices rose in anticipation of disruptions in the oil market.

In the last bout of escalation, Israel struck Iran last week, targeting its nuclear programme and military facilities, which has raised tensions in the Middle East as Iran is retaliating. Oil prices jumped in the biggest intraday move in the last ten years, now settling above USD70 per barrel, after prices traded below this level for almost a year. Gold prices rose, too, while equities fell moderately.

Last week, tariff-related developments continued to dominate financial markets. After the market relief in response to President Trump’s postponement of EU tariffs, investors were surprised on Wednesday by a ruling from the US Court of International Trade (USCIT). The USCIT stated that President Trump has overstepped his authority by using emergency economic powers to raise tariffs.

Last Friday, tariffs came back to the forefront with Trump saying that a 25% tariff must be paid by Apple if phones sold in the US are not made in the US, and “recommending a straight 50 % tariff on the European Union” from 1 June, before swiftly extending trade negotiations until 9 July after a conversation on Sunday with European Commission President Ursula von der Leyen.                          

There’s been a welcome swing in market sentiment since the agreement between the US and China to reduce tariffs for the next 90 days. Compared to the sky-high numbers announced in April, this agreement marks a notable de-escalation in tensions. That said, it’s only a 90-day reduction (with uncertainty about what comes next), which still leaves tariffs at historically high levels not seen since the 1940s.

During our recent rebalancing, we opted for a ‘roughly neutral’ equity stance in lower-risk profiles and a slight overweight in riskier ones instead of fully reinstating our previous overweight. This helped us benefit from the equity recovery in late April and early May.

April was a rollercoaster month in financial markets, starting with the announcement of the US trade tariffs on 2 April which led to an equity sell-off. The market moves we witnessed were truly historic in their speed, compounded by the subsequent retaliation from China.

On April 15, we hosted a special 30-minute webcast focusing on the impact of US tariffs on the global economy and markets. Our speakers were Daniele Antonucci, Chief Investment Officer at Quintet, and Bruno Rovelli, Chair of EMEA Allocation Council Investment Solutions at BlackRock. We received many questions during the webinar.

Over the past week, financial markets experienced significant volatility primarily due to abrupt shifts in US trade policy. Although President Trump announced a 90-day pause on the reciprocal tariffs, the 10% overall tariff is still in place and the ‘trade war’ with China has escalated.