Global Asset Allocation Team Market Update – June 2025
In May, trade headlines once again dominated financial markets – albeit in a relatively positive light as signs of simmering tensions were met with a revival in risk appetite. Notably, the United States and China reached a temporary agreement to de-escalate the trade war, with both countries agreeing to a truce that would see some tariffs on each other’s goods come down substantially for 90 days. While indeed an important step in the right direction, it is early days in negotiations and there’s potential for tensions to flare up again should an agreement prove elusive.
Global equity markets had a solid month, with the MSCI All Country World rising 5.5% in May. The S&P 500 led the global charge thanks to an impressive rebound in the “Magnificent 7” group of stocks – while the S&P/TSX also jumped higher last month. Elsewhere, international stocks continued to shine, while the MSCI gauge of emerging market stocks posted its strongest monthly gain since September.
Fixed income markets generated some mixed results. In the United Sates, treasury yields pushed broadly higher, with the prospect for high and rising fiscal deficits stemming from White House policy, elevated inflation, and Moody’s downgrade of United States debt extending the treasury selloff. Waning expectations for Federal Reserve rate cuts added to the upward move in yields. Investors are bracing for just 49 basis points of rate cuts in 2025 (down from 82 basis points at the beginning of the month). The 30-year treasury yield ended the month just shy of 5%. The 10-year treasury yield rose 24 basis points to 4.40%, while the policy-sensitive 2-year treasury yield jumped 29 basis points to 3.90%. The Bloomberg US Aggregate Bond Index fell -0.7% in May. Those moves spilled-over globally – albeit to a lesser magnitude. In Canada, both the 10-year and 2-year government bond yields rose 11 basis points to 3.20% and 2.59% – respectively. The FTSE Canada Bond Universe was unchanged for the month.
The US dollar (-0.1%) stabilized somewhat following a profound losing streak this year. Still, that marked a fifth consecutive monthly decline – its longest slide since 2020. The greenback was weaker versus the Canadian dollar (+0.4%), euro (+0.2%), and pound (+1.0%) but stronger versus the Japanese yen (-0.7%).
Finally, oil regained some ground on the prospect of increased demand following a détente in the trade conflict between the United States and China (the world’s top consumers of crude) that offset market jitters about OPEC+ boosting supply. By contrast, gold slipped as improved investor sentiment sapped demand for the safe-haven precious metal.
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