Inside the markets | Multi-Asset review

Hello and welcome to the June 2025 monthly market update.

My name's David Aujla and I'm the lead portfolio manager for Invesco's Summit Multi-Asset Fund angers and its model portfolio service.

After a positive May for markets, generally, they continued their upward trajectory in June. Arguably peak uncertainty around trade policy is behind us now, but that's not to say that there's total clarity on its nature and of course its potential impact. There's still a lot to be resolved.

Promisingly, US Treasury Secretary Scott Bezant said that agreements with what the US considered to be their major trade partners should be wrapped up by Labour Day in the US. That's the first of September this year. And there are some examples of progress. For example, the US and China confirmed details of a trade framework in June centred largely around rare earth exports, so from China to the US and the easing of technology restrictions.

When we think about tariffs overall, they were a big deal of course for markets in April around liberation days, but they seem to believe that the impact of tariffs now will be relatively limited, at least compared to what was thought back then. It should be a little surprised maybe then that the more economically sensitive areas of the market like Japanese and emerging market equities delivered the highest returns in June, outperforming more developed market counterparts and within emerging markets actually when we look across the regions like Latin America, Asia, and emerging Europe, all of them did pretty well, so it was a broad based performance during the month.

And then coming back to develop markets, US equities were pretty strong over June, you know, in contrast to previous months, and global smaller companies weren't far behind. Again, that sort of risk on trade there in June. Closer to home though, markets were much more challenged, almost a reversal of recent strength with UK and European equities slightly negative over the month.

The biggest news of course geopolitically was around the Israel and Iran conflict, which was sort of escalated really with direct US involvement, bombers being sent from the US over to Iran to attack and destroy nuclear enrichment capabilities. Equity markets though essentially shrugged off that escalation. The oil price, of course a bit different, surged initially into the high 70s in terms of dollars per barrel, partly at the prospect of disruption of the Strait of Hormuz, but since fallen back. So over the month it was still up in the high single digits in terms of returns or percentage terms, but nothing like where it was at the peak.

The US dollar, of course, briefly rose. But it would be a bit of a stretch, I would say, to say that it acted like the safe haven that we've become used to. In fact, over the month, the dollar was weaker relative to other major developed market currencies, and that's continuing the trend that we've seen since mid January this year, really.

In fixed income markets, returns were also positive across the board, but they did lag equities. It was a risk on month. Higher risk bonds like emerging market debt and higher credit were the better performers, with higher quality investment grade bonds like government bonds and investment grade credits generally lagging.

In terms of monetary policy, there was a reiteration of a wait and see approach from developed market central bankers, so Japan, the US, Europe, and of course here in the UK too. And I suppose on the topic of central bankers, there was some speculation as to who may be the next chair of the Federal Reserve after Jerome Powell. Trump, President Trump made it pretty clear that he wants it to be somebody who's interested in lowering interest rates very, very quickly.

In terms of themes, we also saw that the AI narrative in the US is not necessarily dead. Nvidia reached an all-time high during the month, and there are indications that the hyper scales, that's the likes of Amazon, Microsoft, Google Alphabets, I should say, or Meta, will continue to deploy significant. Absolute expenditure into that area we're talking hundreds of billions of dollars collectively, so quite meaningful numbers into that theme.

Another theme was the realm of defence. So during June, the German budget was passed, bringing in an extra €200 billion of defence and infrastructure spending. And at the NATO summit, all member countries with the notable exception of Spain committed to the new spending target of 5% of GDP.

Now I guess it's a time to reflect that we're at the halfway mark of the year. I think it's fair to say it's been a pretty eventful year, certainly one of the most eventful 6 months of my career, and much of what happened certainly wasn't on most people's bingo card. I think it'd be reasonable to say that the next 6 months will also be uncertain. It might be most surprising if nothing happens. We've yet to see the impact of the events of the past few months and what impact that's had on corporate earnings. Earnings announcements for Q2 begin in the US in the second week of July. The banks are up first, but I'm not convinced those numbers will be as conclusive as we might hope. It will take some time for the impact to come through, and we may have to actually wait till the 3rd quarter earnings, see what they have in store before we know what the impact may be. And even then it might not be definitive.

The market, however, believes to. Seems to believe there'll be no meaningful impact in the near term. That's pretty clear from the direction of markets so far. One positive is that sterling-based investors have generally made a positive year to date return in most asset classes and markets, with a few notable exceptions, the US equity market being one and the oil market being another. US equity. A still negative year to date at the time of this video in sterling terms. Generally speaking, it's paid to be closer to home really in equity, so UK and European equities have been amongst the best performers this year despite a tough June relative to some of those other markets I mentioned earlier.

As I said in the last update, I believe volatility is likely to remain elevated. Having a well diverse portfolio or diversified portfolio is really key, in particular, having the tools to adapt to changing conditions, which I think is something we're going to see over the next month, months and, and of course, years.

I'd like to thank you for taking the time to watch this month's review. I'll see you next time, but as always, if you have any questions in the meantime, please feel free to get in touch. Until next time.