Temporary Relief or Sustainable Rally?: 12 June 2025
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Market Mood
May 2025 saw a rebound in risk assets as easing trade tensions, highlighted by the partial rollback of tariffs on Liberation Day, boosted investor confidence and drove gains in both equities and high-yield bonds. Despite the renewed optimism, markets remain cautious amid persistent inflation, ongoing trade negotiations, and looming political and economic uncertainties. While U.S. stocks rallied modestly and earnings stayed positive, slowing growth and squeezed profit margins signal a more tempered outlook. Key developments included a 90-day tariff pause between the U.S. and China, legal challenges to certain tariffs, and continued uncertainty around fiscal policy. Looking ahead, upcoming economic data and Fed actions will be crucial, and investors are advised to maintain diversified portfolios to navigate the dual risks of high inflation and slowing global growth.