United States
The first seven months of the year were marked by heightened volatility, primarily due to the tariff-driven trade war and geopolitical tensions. By the end of the first half, however, these issues had subsided, enabling markets to resume their upward trajectory—surpassing levels recorded at the start of the year. The Federal Reserve implemented two interest rate cuts, ultimately stabilizing the policy rate at 4.5% as inflation moderated toward the 2.5–3% range. July continued this upward trend, with the only lingering concern being the pending tariff agreements with the EU, Canada, and China. Geopolitical tensions have eased, and despite a recent correction, the U.S. dollar remains undervalued. June’s macroeconomic data supports continued economic expansion: inflation stood at 2.9%, unemployment at 4.1%, GDP grew by 3% in Q2, and new housing starts rose 4.6%.
S&P-500 (12 month graph)
Source: www.bloomberg.com
Europe
The European environment was generally favorable during Q2, with the exception of France, which remains mired in political crisis. The proposed austerity measures (pending approval) aim to reduce the budget deficit over time but have triggered widespread public discontent. The Prime Minister’s reform agenda has faced additional pushback. On a more positive note, Germany’s new fiscal stimulus plan supports recovery in Europe’s largest economy, which continues to suffer from falling exports. July performance was muted as many investors reallocated capital back to the U.S., following the fading recession fears and calming of the tariff narrative.
Eurostoxx-50 (12 month graph)
Source: www.bloomberg.com
Greece
The Athens Stock Exchange delivered a strong performance, rising 10.8% in Q2 2025, fueled by two key developments. First, Aegean’s bond issuance was met with strong demand, offering a 3.7% coupon over a 7-year maturity. Second, the proposed acquisition of the Hellenic Exchanges Group (HELEX) by Euronext—spanning seven national markets—offered an exchange ratio of 20 HELEX shares for 1 Euronext share, signaling renewed international investor confidence. The Greek economy continues to stabilize, and fiscal consolidation is progressing, with the public debt-to-GDP ratio declining from 153% in 2024 to 147% in H1 2025.
The euro-dollar exchange rate declined from 1.16 to 1.14 as the U.S. dollar showed signs of strengthening. Despite lower eurozone interest rates, the euro is expected to remain resilient due to high dollar supply.
EUR/USD (12 month graph)
Interest Rates Outlook
Both the Federal Reserve and the European Central Bank are contemplating one, or at most two, rate cuts—potentially starting in September. However, upcoming tariffs may introduce renewed inflationary pressures, which could necessitate future rate hikes. For the moment, both central banks are maintaining a wait-and-see approach, which has allowed markets to continue trending upwards. European yields remain particularly low.
Source: JP Morgan Guide to the Markets US3Q 2025
Fixed Income Markets
Bond markets initially rallied but later corrected as interest rates appeared to stabilize. Investor focus is concentrated on medium-term maturities (5–7 years), which now absorb the majority of trading volumes. Emerging market debt remains attractive but carries heightened risk. European sovereign bonds are expected to offer limited returns through year-end, with yields already below 2.6%. Conversely, U.S. Treasuries remain more compelling, with yields reaching 4.2% for 10-year and 4.7% for 30-year bonds.
Source: JP Morgan Guide to the Markets US3Q 2025
Source: JP Morgan Guide to the Markets US3Q 2025
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