Navigating beyond peak volatility: A more constructive outlook amid residual uncertainty

At the start of the year, we positioned client portfolios with a more cautious tilt, anticipating heightened levels of uncertainty and volatility under the leadership of President Trump, who has often emphasised the strategic value of unpredictability. While we expected a turbulent environment, the scale and nature of geopolitical developments and trade tensions that have unfolded since were difficult to foresee.

Despite persistent eye-catching headlines and market noise, underlying economic fundamentals have remained relatively stable. The divergence between soft data (such as subjective sentiment surveys and leading indicators) and hard data (actual economic performance) has widened, yet investors have increasingly focused on a more constructive outlook for the coming year. This optimism is underpinned by a supportive monetary and fiscal policy environment globally.

Global equity markets reached new highs by the end of the second quarter, completing a notable rebound from the sharp sell-off triggered by the initial ‘Liberation Day’ announcement of US tariffs on April 2nd. Since hitting a 17-month low on April 8th, the MSCI All Country World Index (ACWI) has risen by 24%, regaining all the lost ground and more.