Market Fragility Looms as Investors Brace for a Turbulent Summer

Economic

Summary:

As geopolitical tensions and trade uncertainties intensify, major investors are building defensive positions ahead of a traditionally volatile August...

Defensive Positioning Reflects Deepening Investor Caution

Institutional investors are adopting a highly cautious stance as they head into the summer months, particularly with the July 9 U.S.–EU tariff deadline approaching and global markets still processing fragile geopolitical developments. The 2024 August sell-off—driven by low liquidity and amplified fears of global economic deceleration—has left a lingering impact, encouraging firms like HSBC and Goldman Sachs to pre-emptively shield portfolios from potential shocks.

HSBC’s global CIO, Xavier Baraton, has taken a bearish three-month view, asserting that markets are overly optimistic and unlikely to receive the positive catalysts they are pricing in. His strategy includes purchasing equity put options as downside protection. Goldman Sachs has echoed this sentiment, advising investors to employ a mix of volatility, interest rate, and trend-following hedging strategies to guard against unexpected declines.

Geopolitical and Trade Risk Undermine Confidence

Much of the concern is driven by geopolitical and policy-related uncertainty. The tenuous ceasefire between Israel and Iran, combined with heightened oil price volatility, creates a precarious environment for risk assets. Simultaneously, the sluggish progress in U.S.–EU tariff negotiations, with the deadline just weeks away, underscores the vulnerability of global trade flows to renewed disruption.

Although global equities have rallied by 7 percent in 2025 and remain near record highs, the subdued level of the VIX—currently below 18—might not fully reflect underlying risks. Futures contracts covering the July 9 period show a noticeable premium over the spot VIX, indicating market expectations of short-term turbulence.

This situation reflects a broader pattern where markets exhibit seemingly stable behavior despite accumulating risk. Investors, such as those at LGIM, note the disconnect between market complacency and mounting trade and fiscal threats, particularly given the looming U.S. debt expansion from Trump's proposed legislative package.

Automated Trading and Market Feedback Loops

Another layer of complexity stems from algorithmic trading. Volatility control funds, which collectively manage an estimated USD 700 billion, operate on feedback loops that can inadvertently amplify market movements. When volatility is low, these funds tend to buy risk assets, which suppresses volatility further. However, if volatility surges, they aggressively unwind positions, potentially accelerating downturns.

RLAM's multi-asset team has expressed concern over this automated behavior. While their internal systems signal increased equity allocation, human managers have chosen to override the models, trimming risk exposure in anticipation of possible dislocations. This decision reflects an understanding that programmed optimism may be misaligned with macroeconomic and geopolitical realities.

Energy Volatility Complicates Currency Expectations

Oil prices are exhibiting unusually erratic behavior, fluctuating between USD 63 and USD 81 per barrel in June alone—one of the most volatile months in over a decade. This has fueled speculation that a potential supply shock, particularly from disruptions in the Strait of Hormuz, could shift the global risk landscape.

Goldman Sachs’ Simon Dangoor highlights that such a scenario could reverse expectations of a weakening dollar. A sudden spike in oil prices may strengthen the greenback in a flight-to-safety dynamic, challenging consensus currency forecasts and putting additional pressure on emerging markets.

Summer Outlook: Risks Override Seasonal Calm

Options market activity suggests traders anticipate more frequent and pronounced single-day volatility events, similar to those seen in August 2024. UBS's Gerry Fowler interprets this as a warning sign for investors expecting a quiet summer. In fact, reduced participation—typical of summer months—could exacerbate volatility if unexpected catalysts arise.

Despite an apparent easing of Middle East tensions, the undercurrents of global risk have not subsided. Investors are increasingly aware that even subtle shocks could trigger disproportionate reactions in illiquid markets.

While surface-level indicators show resilient markets and subdued volatility, institutional behavior tells a different story. Elevated hedging activity, reluctance to follow automated signals, and anticipation of trade or oil-driven shocks reveal a financial system bracing for instability. The thin liquidity of the summer months may amplify even minor tremors, making the current environment one where tactical defensiveness may prove prudent. Investors are not betting on disaster—but they are no longer assuming calm.

Source: Reuters

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

Add to Favorites

Gerik

Economic

Post-Brexit Anniversary: A Turning Point for National Accountability

June 23 marks the ninth anniversary of the Brexit referendum—a pivotal moment that removed the UK from the regulatory frameworks of the European Union. Without the EU to attribute shortcomings to, Britain is now left confronting its own economic architecture. This shift has redefined both responsibility and opportunity in the country’s development path.

At its inception, EU membership offered Britain access to harmonized rules that facilitated the movement of capital, labor, and goods. The alignment among member states, both economically and culturally, helped foster collective prosperity and elevated the bloc’s global influence. However, over time, expanding authority from Brussels and growth-inhibiting regulations began to clash with the UK’s market-oriented system. Brexit was framed as a solution to regain agility—politically and economically—in a rapidly evolving world order.

Political Normalization After Initial Unrest

In the aftermath of the referendum, the UK endured several years of turbulence. But by 2025, the political climate has stabilized. This is not necessarily an endorsement of policy effectiveness, but rather a recognition that the heightened partisan volatility has eased. Political debates have returned to a more typical cadence, allowing for clearer policy discussion and long-term planning.

Britain has begun leveraging its ability to act independently on international trade matters. Agreements with the United States and India, alongside the temporary suspension of import tariffs on select goods, illustrate the country’s improved responsiveness to global trade disruptions. However, none of these actions yet reflect the scale or ambition needed to refute the perception that Brexit represents economic retrenchment. While there is a newfound capacity to shape bilateral partnerships, the scope and depth of these efforts remain limited.

Taxation and Public Sector Expansion as Economic Constraints

The UK now bears some of the highest tax burdens since 1948. Tax revenue has increased from 37 percent of GDP in 2016 to 41 percent in 2025. This rise corresponds with a surge in national debt, now at GBP 1.2 trillion, and an increase in government spending from 40 percent to 45 percent of GDP. These changes mirror the fiscal characteristics of European welfare states that Brexit was partly meant to avoid.

Policy decisions made by both Conservative and Labour governments—such as higher corporate tax rates and elevated employer National Insurance contributions—have undermined business growth. The tax system has also grown more complex, reducing transparency and efficiency. This suggests a correlational link between post-Brexit fiscal strategies and the stagnation in private sector dynamism.

Public Sector Inefficiencies Undermine Economic Innovation

Nearly half of the UK’s economic activity is now directed by the public sector. In the absence of profit-and-loss accountability, inefficiencies and waste have become systemic. Though regulatory reforms have made some progress in easing outdated planning laws, these are overshadowed by expansive net-zero commitments and employment laws that disincentivize hiring. Businesses increasingly report burdensome compliance processes that redirect attention from innovation, investment, and market engagement.

Brexit has, above all, clarified the root of Britain’s economic dysfunctions. With no external bureaucracy to blame, internal mismanagement and systemic inefficiencies have become more visible. This shift in narrative, while uncomfortable, may yield long-term benefits by focusing reform efforts on domestic policy failings rather than external scapegoats.

Short-term disruptions following Brexit, including political uncertainty and trade adjustments, should not be the sole metrics by which its success is judged. The long-term impact will hinge on the trajectory of the EU and the UK’s ability to forge meaningful alliances and implement structurally sound policies in a multipolar global economy. The hope is that through cycles of policy experimentation and leadership transitions, the UK will eventually cultivate a governance model that capitalizes on its post-Brexit freedom while addressing its enduring economic flaws.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Gerik

Economic

Vietnam’s Trade Performance in the First Half of June 2025

By June 15, 2025, Vietnam’s total import-export turnover had reached USD 390.91 billion, an increase of 15.3 percent or USD 51.84 billion compared to the same point in 2024. However, this cumulative growth stands in contrast to a noticeable month-on-month decline in early June, where total trade fell to nearly USD 35 billion, down 17.6 percent from the second half of May 2025. The divergence between short-term and cumulative performance invites an exploration of underlying trade dynamics.

Exports during the first half of June 2025 amounted to USD 17.54 billion, a decline of 22.7 percent from late May. This downturn was concentrated in key sectors including electronics, machinery, and garments. Specifically, exports of computers, electronic products, and components declined by USD 801 million, or 15.7 percent, while machinery and related equipment dropped by USD 789 million (27.2 percent). The mobile phone sector also showed a notable contraction of USD 777 million (29.1 percent), suggesting a short-term demand compression in global technology markets or cyclical inventory adjustments from key trading partners.

Despite this temporary pullback, the year-to-date export total rose to USD 197.88 billion, up 13.7 percent from the same period in 2024. The primary drivers of this growth were robust performance in high-tech manufacturing and agriculture. Computers and electronics contributed an additional USD 12.35 billion, a 40.7 percent rise, while machinery and equipment rose by USD 3.17 billion, or 15.1 percent. Coffee exports, reflecting both favorable global prices and increased output, surged by 62.6 percent, adding USD 1.94 billion to the national export ledger.

This pattern indicates a relationship where long-term structural competitiveness in key export sectors coexists with short-term sensitivity to global economic cycles, especially in electronics and apparel.

Import Growth Reflects Investment and Production Activity

Imports reached USD 17.46 billion during the first half of June 2025, decreasing by 11.6 percent (USD 2.3 billion) from the second half of May. The contraction was most prominent in electronics, which dropped by nearly USD 1 billion (14.9 percent), followed by machinery and equipment (USD 343 million, down 12.4 percent) and corn (USD 117 million, down 69.1 percent). This suggests a temporary slowdown in industrial procurement or supply chain adjustments.

Nevertheless, cumulative imports stood at USD 193.03 billion by mid-June, rising 16.9 percent (USD 27.96 billion) over the same period in 2024. The electronics sector again played a central role, with a USD 16.68 billion increase (36.9 percent), while machinery imports rose by USD 4.71 billion (22.8 percent). These gains indicate continued demand for capital goods and intermediate inputs, reinforcing the correlation between import trends and domestic manufacturing momentum.

Trade Surplus Narrows in June But Remains Positive

Vietnam posted a trade surplus of USD 83 million in the first half of June. This relatively small surplus contrasts with earlier periods but keeps the year-to-date surplus at a healthy USD 4.84 billion. The surplus reflects Vietnam’s ongoing role as a net exporter, supported by the resilience of high-value manufacturing sectors.

The sharp decline in both exports and imports during early June appears to reflect temporary factors such as seasonal fluctuations, logistical constraints, or softening external demand in select sectors. However, the persistent rise in cumulative trade value suggests that the fundamentals of Vietnam’s external sector remain strong. The disproportionate growth in electronics and machinery indicates deeper industrial integration and suggests that the import of capital goods is likely to support future export capacity.

These trends reveal a clear correlation between rising import demand for production inputs and subsequent export performance. Moreover, while the monthly fluctuations signal vulnerability to global cycles, the underlying trajectory points to sustained competitiveness in both high-tech and agricultural sectors.

Vietnam's trade trajectory in 2025, as reflected by the data through mid-June, showcases a dual narrative: short-term softness coexists with long-term expansion. The cumulative increase in trade value, led by electronics, machinery, and coffee, underscores structural resilience. Policymakers and businesses should remain alert to external market signals while leveraging Vietnam’s growing role in global supply chains to sustain this momentum through the second half of the year.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Gerik

Economic

Global Recognition of Mexico’s Economic Strength

At the recent “Fitch on Mexico” event held in Mexico City, Ian Linnell, Global President of Fitch Ratings, emphasized Mexico’s continued attractiveness as a key investment destination. Positioned among the world’s top 20 economies, Mexico’s identity as a major exporter and manufacturing hub integrated deeply into global supply chains stands out in an era of volatile global trade.

Its rich natural resources and expanding consumer market further solidify its appeal to global banks and institutional investors. According to Fitch, Mexico has shown resilience against inflationary cycles, tightening monetary policies, and international trade disruptions, though it still grapples with structural governance issues and moderate growth momentum.

Short-Term Frictions, Long-Term Potential

Despite current macroeconomic headwinds, such as global economic slowdown and domestic political uncertainties, Fitch highlights Mexico’s robust ability to weather shocks. Key long-term challenges include navigating the rise of artificial intelligence, demographic shifts, and financing the green transition—challenges that are not unique to Mexico but are universally shared.

Shelly Shetty, head of sovereign ratings for the Americas and Asia at Fitch, addressed the nearshoring trend—relocation of manufacturing closer to home markets—saying it is ongoing in Mexico, though perhaps progressing slower than anticipated. She noted that nearshoring is inherently a medium-term process, with long-term benefits yet to fully materialize.

USMCA and Border Policy Remain Critical Variables

Policy stability, particularly around the U.S.-Mexico-Canada Agreement (USMCA) and immigration enforcement by the U.S., will play a critical role in shaping Mexico’s investment landscape. Any renegotiations or political shifts could influence supply chain predictability, especially given Mexico’s tight commercial linkage to the U.S., the world’s largest consumer market.

Nonetheless, Shetty affirmed that Mexico's geographic advantage and deep market integration remain irreplaceable, cushioning it from the worst effects of temporary policy turbulence.

Conservative Yet Upwardly Biased

Fitch Ratings currently forecasts a 0.4% economic contraction for Mexico in 2025, citing global drag and internal inefficiencies. However, this figure is under review for a possible upward revision, buoyed by improving U.S. economic indicators and a milder-than-expected impact from ongoing global trade disputes.

Mexico’s trajectory in the near future hinges on both internal reforms and external conditions—but its strategic location, diversified economy, and active participation in the global trade network keep it firmly on the radar for investors seeking stable emerging market opportunities.

Source: Fitch Ratings

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Gerik

Economic

Forex

Investor Sentiment Shaken by Fed Leadership Uncertainty

In a move that rattled global markets, President Trump reportedly signaled intentions to announce a replacement for Jerome Powell by September or October, reigniting concerns over the independence of the Federal Reserve. The possibility of a highly dovish successor — potentially aligned with Trump’s agenda of aggressive rate cuts — has pressured the U.S. dollar and reignited fears about the politicization of monetary policy.

Tony Sycamore, analyst at IG, noted that such developments could further erode confidence in U.S. financial institutions, especially if markets interpret any new appointee as a threat to the Fed's credibility and long-standing independence.

Dollar Hits Multi-Year Low as Safe Havens Rise

The U.S. dollar index slid to its weakest level since March 2022, continuing a downward trend that has seen it lose 10% year-to-date. The euro surged to $1.6805, its highest since late 2021, while traditional safe-haven currencies like the Swiss franc and Japanese yen gained sharply. The yen firmed 0.35% to 144.70 per dollar.

This depreciation reflects growing unease about U.S. fiscal discipline, trade instability, and weakening faith in the central bank’s leadership as the country inches closer to Trump’s July 9 deadline for revised trade pacts.

Asian Equities Muted Despite Wall Street Gains

MSCI’s broadest index of Asia-Pacific shares outside Japan showed little change on Thursday, suggesting that regional markets are in wait-and-see mode. Japan’s Nikkei bucked the trend, climbing 0.9% to a four-month high, buoyed by the weakening yen and expectations of continued monetary stimulus.

Wall Street had rallied the day before, aided by recovering oil prices and hopes of resilient domestic demand, but the momentum did not fully carry over to Asia as traders weighed the risks of sudden leadership shifts at the Fed and potential policy volatility.

Crude prices moved modestly higher, extending gains following a larger-than-expected draw in U.S. inventories and a tentative ceasefire between Israel and Iran. Brent crude rose to $67.82 per barrel, while WTI edged up to $65.10. Although the geopolitical environment remains tense, signs of stable demand and potential OPEC+ production shifts have helped prevent another price plunge.

Risks Rising on Multiple Fronts

Despite ongoing ceasefire talks and temporary calm in the Middle East, the larger concern remains the U.S. domestic policy front. The Federal Reserve continues to walk a tightrope: Powell reiterated on Wednesday that tariffs could deliver a short-term inflation spike, but the longer-term threat of entrenched inflation remains, particularly with the possibility of an expansionary fiscal and trade policy under Trump.

Bank of America analysts warned that global bond markets could be at risk if key economies continue to drift toward unsustainable fiscal paths. They emphasized that downside risks to global growth stem not only from trade tensions but also from unstable political developments in major economies.

As markets await more clarity on Trump’s tariff strategy and the Fed’s next move, volatility is likely to remain elevated — with investors pricing in a higher likelihood of rate cuts, a weaker dollar, and a global economy facing both political and structural tests.

Source: Reuters

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Julia Daniels

Key points:

● Doctrine calls for using "overwhelming military power" but avoiding protracted conflicts

● Trump faces pressure to explain US attacks on Iran's nuclear program

● Too soon to declare Trump's Iran strategy a success or failure, analyst says

With his order for B-2 bombers to strike Iranian nuclear sites on Sunday, President Donald Trump swerved away from his usual reluctance to use military force, directly involving the U.S. in a foreign war and alarming many of his "America First" supporters.

Now, the thinking behind his decision has a name, according to Vice President JD Vance: the Trump Doctrine.

Vance laid out the elements in remarks on Tuesday: articulate a clear American interest, try to solve a problem with diplomacy and, if that fails, "use overwhelming military power to solve it and then you get the hell out of there before it ever becomes a protracted conflict."

To some observers, however, the new doctrine sounds like an effort to offer a tidy framework to describe a foreign policy that often looks unpredictable and inconsistent.

"It's hard for me to relate seriously to something called the 'Trump Doctrine,'" said Middle East analyst Aaron David Miller, a senior fellow at the Carnegie Endowment for International Peace.

"I don't think Trump has a doctrine. I think Trump has only held instincts."

Trump's decision to get involved in the conflict between Israel and Iran came after Supreme Leader Ali Khamanei said Iran would not give up its ability to enrich uranium. Soon after the U.S. strikes, Trump announced a ceasefire, which has mostly held.

On Wednesday, Trump vowed again that Iran would not be allowed to have a nuclear weapon and said talks with Tehran would resume next week. Iran has said its nuclear program is for peaceful purposes only.

“President Trump and Vice President Vance are the perfect team because they share the same ‘peace through strength’ vision for U.S. foreign policy," said White House spokeswoman Anna Kelly in response to a request for comment.

MAGA WORRIES

Trump faces pressure to explain his decision to intervene in the Israel-Iran conflict. Vance, who previously embraced isolationism, has been one of the administration's main messengers on the issue.

Trump helped win over voters by arguing that the "stupid" U.S.-led wars in Iraq and Afghanistan had left the United States in a quagmire and that he would work to avoid foreign entanglements.

He has mostly stuck to the pledge, with some exceptions: the use of American force against Houthi rebels launching attacks from Yemen this year, and his orders to kill ISIS leader Abu Bakr al-Baghdadi in 2019 and Iranian Revolutionary Guard commander Qasem Soleimani in January 2020.

But the prospect of the United States getting dragged into an extended conflict with Iran angered many in the isolationist wing of the Republican Party, including prominent Trump supporters like strategist Steve Bannon and conservative media personality Tucker Carlson.

Opinion polling also reflects deep concern among Americans about what might come next.

Some 79% of Americans surveyed in a Reuters/Ipsos poll that closed on Monday said they worried "that Iran may target U.S. civilians in response to the U.S. airstrikes."

Melanie Sisson, a senior foreign policy fellow at the Brookings Institution, said Vance appears to be trying to satisfy Trump's right flank by "trying to figure out how to explain how and why the administration can undertake a military action without it being a prelude to war."

To some, Vance's Trump Doctrine rings true.

"Vance has provided an accurate summary of President Trump's approach over recent days to the conflict in the Middle East," said Clifford May, founder and president of Washington's Foundation for Defense of Democracies think tank.

"Most outside analysts, and certainly most historians, may think the term 'doctrine' is premature. But if President Trump builds on this successful use of U.S. force, it would be a tremendous doctrine for President Trump to boast," May added.

Still, whether the new framework sticks will likely depend on how the current conflict ends.

It is too soon to “pronounce either that this was a brilliant success or that it was a massive strategic failure," said Rebecca Lissner, an expert at the Council on Foreign Relations.

"We need to see how the diplomacy plays out and where we actually land in terms of constraint, visibility and survival of the Iranian nuclear program."

Source: TradingView

Risk Warnings and Disclaimers

Add to Favorites

Gerik

Economic

Commodity

U.S. Stock Draw Fuels Optimism Despite Geopolitical Overhang

Crude oil futures climbed modestly in Asian trading on Thursday, with Brent rising to $67.80 and WTI up to $65.12. This marks a continuation of Wednesday’s nearly 1% gain, driven largely by a bullish signal from the U.S. Energy Information Administration (EIA): a crude stock drawdown of 5.8 million barrels, far exceeding the forecasted 797,000-barrel decline. Gasoline inventories also surprised markets by falling 2.1 million barrels instead of rising, as gasoline deliveries hit their highest since December 2021.

These figures underscore a strong recovery in U.S. domestic energy demand, particularly heading into the summer travel season. According to Yuki Takashima of Nomura Securities, this supply-demand dynamic is nudging buyers back into the market, with WTI potentially stabilizing around the $60–$65 range if tensions subside.

Ceasefire in the Middle East: Fragile Optimism and Strategic Recalibrations

While U.S. demand fundamentals appear strong, broader market sentiment remains fragile. Investor nerves are on edge as they await confirmation on the durability of the Iran-Israel ceasefire. The ceasefire, hastily negotiated following U.S. airstrikes on Iranian nuclear facilities, is still prone to disruption, and any resumption of hostilities could cause renewed oil supply fears, particularly through the Strait of Hormuz.

U.S. President Donald Trump, who facilitated the ceasefire, declared it a success and reiterated his administration's goal of ending Iran’s nuclear ambitions. Although he maintained that the U.S. is still enforcing its “maximum pressure” sanctions on Iran’s oil exports, he hinted at possible leniency to allow Iran some economic breathing room. Markets are now watching for any concrete changes in U.S. sanctions policy, especially ahead of next week’s planned talks between Washington and Tehran.

OPEC+ Dynamics and Russian Hints of Policy Shifts

Adding another layer to oil market uncertainty is speculation about OPEC+ policy changes. Igor Sechin, CEO of Russia’s Rosneft, stated that the alliance could accelerate its timeline for increasing production, possibly moving forward scheduled hikes by up to a year. If implemented, this would increase supply and potentially cap upward price momentum.

Currently, Brent and WTI are still trading well below their conflict-spike levels from earlier in the week, reflecting a recalibration of expectations: while geopolitical risks are still present, markets are now increasingly focused on structural fundamentals like inventory drawdowns and OPEC+ behavior.

With demand-driven support from the U.S. consumer market and cautious optimism on the diplomatic front, oil prices have regained some footing. Yet the balance remains delicate. A sustained price rally will depend on whether the Iran-Israel ceasefire holds, how the U.S. approaches sanctions enforcement, and if OPEC+ surprises the market with earlier-than-expected output increases. Until then, oil is likely to trade within a narrow range, as investors brace for further clarity.