Investment Update – June 2025

What happened in markets?

Global equities moved higher again in June, with fears of a tariff-induced recession all but disappearing. Markets, buoyed by ongoing trade negotiations and a cessation of hostilities between Israel and Iran,
reached all-time highs in several cases. US and Emerging Market equities outperformed, returning 3.4% and 4.3% respectively, with the former led by the technology sector as AI enthusiasm returned.

Returns across fixed income assets were also broadly positive, with US growth fears dragging yields lower. Inflation appears well contained in the US and markets are sniffing out the prospect of rate cuts by September. While the ECB followed through with a June rate cut, as expected, both the Bank of England and Federal Reserve were more reticent, citing uncertainty around tariff-related inflation and wage growth as reasons to hold rates at current levels.

Oil had a turbulent month, rising by over 10% as direct conflict between Israel and Iran threatened global oil supply and broader regional stability, before falling back sharply as it became clear that any Iranian retaliation to US air strikes would be limited. Gold had a subdued month after a frenetic rally at the start of the year.

What did we do in the funds?

Towards the end of the month we trimmed US equities across the VT Esprit fund range, following a period of outperformance versus other major equity markets as valuations recovered towards the highs seen earlier in the year. We reallocated this across European and UK equities where valuations are more attractive and fiscal policy is likely to provide a growth boost, particularly in Germany.

Within fixed income we modestly reduced US government bonds as 10-year yields fell to 4.25%, towards the lower end of their 6-month range. Absent a recession or a serious deterioration in the US labour market, we don’t expect yields to fall much further from here.

We reallocated the capital to high yield and emerging market bonds which offer higher yields and therefore the prospect of stronger total returns, with less sensitivity to inflation expectations and interest rates.

Both asset classes have weathered several market shocks in recent years, with only modest spread widening occurring

What is the outlook?

The global economy has held up well in the face of elevated policy uncertainty, rising tensions across the Middle East, and the subsequent impact on financial markets. Recession odds have decreased in response, although US growth is slowing and the tariff ‘pause’ is set to end in July.

The Fed has so far resisted calls for a resumption of interest rate cuts, despite no evidence as yet that tariffs have had an inflationary impact. With the Trump administration enthusiastically questioning the competence of Chair Powell and demanding rate cuts, any weakness in US jobs data should be enough to sway the Fed to adopt a more dovish rate path.

Robust economic activity coupled with resilient labour markets, falling inflation and lower interest rates provide a supportive backdrop for equity markets, although we acknowledge US valuation risk through an underweight position to the region. The Mag-7 stocks have reasserted their dominance in recent weeks with Microsoft and Nvidia climbing to record highs, with earnings delivery key to the sustainability of their valuation premium.

Download our full Investment Update to access more details

Do you want to learn more about how we invest?

Learn more about our investment process, our funds and the Investment Team here.

If you have further questions about investing with Shackleton or want to get in touch with our team, please contact us. We are always happy to help.

Important information:

This document is issued by Shackleton, which is a trading style of Shackleton Advisers Limited. Shackleton makes no warranties or representations regarding the accuracy or completeness of the information contained herein.  We have prepared the following document based on our view of the current market. Nothing in this document shall be deemed to constitute financial or investment advice in any way. We recommend you speak to your adviser before making any decisions.  This document shall not constitute an invitation or inducement to any person to engage in investment activity. Past performance is not a guide to future returns and the value of capital invested and any income generated from may fluctuate in value. 

Related posts:

2025 Investment Outlook – Half Year Review and Look Ahead to the Second Half of the Year 2025 investment outlook: sticking to the knitting Investment Update – April 2025