LCI Monthly – What Shaped June 2025
Economy & Politics
Fed & global central banks diverge
At its June meeting (June 17–18), the Federal Reserve held steady at 4.25–4.5%, signaling modest optimism by projecting two quarter‑point cuts by year‑end—even as uncertainty about tariffs lingers. Meanwhile, domestic consumer confidence dipped in June, hit by worries over tariffs and living costs. In sharp contrast, the ECB cut its deposit rate by 25 bp to 2%, citing easing eurozone inflation and external headwinds. The Swiss National Bank joined this wave on June 19, cutting rates by 25 bp amid subdued inflation, aligning with Norway, Sweden and Norway . This divergence marks a shift: tightening US monetary policy alongside more accommodative approaches in Europe and Switzerland.
Middle‑East jitters rattle markets
Renewed conflict between Israel and Iran in mid-June triggered a sharp rally in oil prices. Following Israeli airstrikes on Iranian military infrastructure and retaliatory missile launches from Tehran—along with threats to close the Strait of Hormuz—WTI crude surged by over 20% from end-May levels, peaking above US $75/bbl. Safe-haven assets like gold and the Swiss franc also strengthened, while global equities came under pressure. As the immediate crisis de-escalated and the Strait remained open, oil prices pulled back sharply. By month-end, WTI had dropped back to around US $65/bbl.
BIS warns on global fragility
The Bank for International Settlements flagged a “pivotal moment” in the global economy, warning that US‑driven trade friction and geopolitics are shaking the post‑war economic order. Its June report stressed rising unpredictability and risk to public and market confidence in institutions, setting the tone for cautious investment strategies heading into summer.
US-China trade pause—but tensions remain
The US and China agreed on a 90‑day tariff truce in Geneva and London, easing tensions and opening markets to Chinese rare‑earth exports, with China positioning itself as a stabilizing trade partner. However, underlying structural challenges—like overcapacity and weak domestic demand—persist. And with the truce expiring in July, the potential for renewed tariff escalation remains high.
Bottom line:
June saw a dramatic mix—Middle‑Eastern conflict, global policy divergence, cautious optimism on trade détente, and shifting capital flows towards non‑US markets. We enter July with heightened geopolitical and macroeconomic uncertainty. LCI remains positioned defensively, favouring inflation‑hedged and underweighting US assets.
Trump targets Powell, USD reacts
Late in June, Donald Trump publicly criticized Fed Chair Jerome Powell, calling him “terrible” and suggesting potential replacement candidates more aligned with his policy agenda. The attack escalated market worries over central bank independence, fueling expectations of steeper rate cuts. As a result, the dollar index slid to fresh three-year lows, hovering around 97 — roughly 10% below January level. Emerging-market currencies and gold picked up some of the slack.
Markets
Fixed Income
Eurozone
In Europe, sovereign yields edged lower as inflation data softened and the likelihood of further ECB rate cuts increased. Corporate bond markets rebounded, with both investment-grade and high-yield debt attracting renewed inflows. Issuance picked up after a quieter spring, and spreads tightened amid rising investor confidence. The outlook for European fixed income turned more constructive as monetary policy appears to be entering a new, more accommodative phase.
USA
In the United States, bond markets rallied in June as investors increasingly priced in a possible rate cut by the Federal Reserve later this year. Treasury yields declined across the curve, with long-dated bonds seeing particularly strong demand. As a result, broad bond indices posted solid gains. Credit spreads tightened, especially in the high-yield segment, reflecting improved risk appetite. The municipal bond market also remained active, with strong investor demand absorbing a high volume of new issuance.
Equity
Global Overview
The MSCI World rose by 4.3% in June, reaching new record highs. Gains were driven by strong U.S. equity performance, renewed optimism around global rate cuts, and a weaker dollar, which amplified returns from non-U.S. markets. However, this masked weaker or even negative returns in many countries when viewed in local currencies — particularly in Europe and Switzerland.
Europe
June saw negative performance across most European markets. Profit-taking set in after a prior rally, with political uncertainties weighing, particularly in France. Defensive sectors underperformed, and Switzerland was hit hardest due to sector-specific weakness. Rising hopes for future ECB easing provided limited respite.
North America
U.S. stocks continued their upward trend, fueled by solid earnings and expectations of upcoming rate cuts. Investor confidence was reinforced by cooler inflation data and robust tech sector performance. In Canada, markets also advanced, supported by strength in energy and financial industries.
Asia-Pacific
Asia remained a tale of two paths. South Korea and Taiwan led thanks to strength in semiconductors and AI exposure. Japan saw modest gains from yen weakness and improving exports, while China remained subdued with soft domestic sentiment. India continued its steady climb, but markets like Indonesia lagged amid outflows and weaker macro trends.
Latin America
Latin American markets delivered mixed returns. Brazil enjoyed a commodity-led rebound, while Mexico experienced more muted gains amid political noise. Still, regional valuation appeal and anticipated trade benefits underpinned overall stability.
in local currency
in EUR terms
Global Sectors in USD