An electric surge of policy panic gave way almost as quickly to relief, setting a tone of caution mixed with opportunity as investors absorbed the whim of headline politics.
The quarter opened with a cascade-style sell-off that felt unusually visceral, every major equity and credit market caught in the downdraft as ‘Liberation Day’ tariffs sent shockwaves through global trade-sensitive sectors. Yet before long, bond yields climbed so sharply that even a combative political back-and-forth couldn’t sustain the sell-off. In a dramatic pivot, the administration’s 90-day tariff pause proved enough to spark the so-called TACO trade, an ironic nod to the market’s faith that the threat of reciprocal duties would ultimately be softened by political reality. This reversal wasn’t just academic. Retail investors rushed back into US stocks via ETFs, while hedge funds that had shunned the initial rally found themselves compelled to chase upside, reinforcing one of the most ferocious V-shaped recoveries on record.
Just as traders were recalibrating their views on risk, a swift foray into the Middle East reminded everyone that geopolitical brinkmanship remains capable of stoking fresh anxiety. When strategic strikes on nuclear facilities sent crude oil tumbling and equity volatility contracting, it became clear that even direct military engagement can be priced as a contained event, so long as broader supply channels remain intact. A hastily-brokered ceasefire underscored the market’s growing appetite for data over drama, with indices extending gains into quarter-end.
Amid this backdrop, the US dollar’s role as ultimate safe haven was called into question. A sharp 7 per cent slide in trade-weighted terms exposed vulnerabilities in the ‘greenback’ narrative, driven by eroding policy credibility and ballooning fiscal deficits. Currency weakness offered relief to emerging-market borrowers and exporters alike, while simultaneously placing domestic-focused businesses under renewed scrutiny for margin pressures.
Equities in sterling terms finished modestly positive overall, yet beneath the surface the story was one of divergence. Japan’s export-heavy Nikkei outpaced most regions as tariff fears receded, while Europe and emerging markets gained support from a softer dollar and promising corporate earnings. Tech-led strength in the US proved eye-catching, though the concentration at the top of the S\&P 500 cautions against assuming a uniform upward trajectory. With valuations of the largest growth names rivalling peaks last seen during the dot-com era, the temptation to chase momentum must be balanced against historical precedents for mean reversion.
Fixed income saw its own drama. European bond yields gyrated on central bank signals, with the ECB’s surprising hawkish tilt on rate cuts tempering enthusiasm even as deposit rates dipped to 2 per cent. In the UK, markets began to price a gradual pivot by the Bank of England, though internal dissent among policymakers suggested that any easing will hinge on fresh data. Across the Atlantic, a near-certain Fed cut in September reflects mounting pressure from softer lending and slowing consumer trends, yet persistent tariff uncertainty poses a risk to the outlook for inflation and interest rates alike.
The commodity space proved underwhelming, as traders largely dismissed further tariff drama as noise. Oil’s volatility highlighted the tug of supply decisions among OPEC+ and geopolitical flare-ups, while gold and silver delivered muted returns despite reaching fresh highs in dollar terms. For longer-term investors, precious metals’ role as portfolio insurance remains compelling, particularly against a backdrop of rising government debt and the risk of fiscal dominance undermining monetary discipline.
Looking ahead, the quarter’s tumult affirms the value of diversification and disciplined positioning. TEAM’s multi-asset portfolios maintain a balanced equity allocation with a modest tilt towards non-US markets, reflecting the appeal of European valuations, global value opportunities in the UK, and selective exposure to Asian growth. In fixed income, focus remains on intermediate-dated bonds and high-quality corporate credit to navigate rate volatility and credit spreads. Physical gold and mining equities continue as strategic ballast, while fresh silver exposure is being added to capture potential industrial demand from technology and renewable energy sectors.
Rather than chase headlines, we adhere to a systematic process designed to navigate this cycle’s rapid policy shifts. By combining rigorous risk management with calibrated asset allocation, we aim to deliver resilient performance across market regimes.
TEAM plc (LON:TEAM) is building a new wealth, asset management and complementary financial services group. With a focus on the UK, Crown Dependencies and International Finance Centres, the strategy is to build local businesses of scale around TEAM’s core skill of providing investment management services.
