As we head into the second half of 2025, the market is gradually finding direction after a first half marked by policy confusion and geopolitical anxieties. While some risk factors have eased at the margin, uncertainty remains the key theme. This article provides a structured outlook for the coming months through four lenses: tariff policy, monetary path, U.S. equity valuations, and the credibility of the U.S. dollar.
Read more>>H1 2025 Markets Review: The Truth and Risks Behind the “V-Shaped Rebound”
Trump’s Tariff Strategy Shifts: Repricing Risk in Focus
In H1 2025, President Trump revived his "reciprocal tariffs" rhetoric, reigniting global trade tensions. However, his trademark "high-pressure negotiation" tactics met with strong pushback from China, Europe, and Japan, ultimately leading to a partial retreat. Markets have since coined the phrase “TACO” — Trump Always Chickens Out — to describe this pattern.
Now, with the 90-day grace period set to expire on July 9, investors are watching closely for signs of extension or enforcement. A significant rollback or delay in tariffs would likely be viewed as a positive signal, supporting a recovery in risk sentiment.
From a sector perspective:
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Apparel retailers (e.g., Nike $Nike(NKE)$ , Skechers $Skechers USA(SKX)$ ) are particularly exposed due to reliance on Asian supply chains.
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Consumer electronics (e.g., Apple $Apple(AAPL)$ ) may see volatility due to heightened U.S.-China tensions.
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Software and subscription-based companies are more insulated and remain stable.
Whether or not these tariffs are implemented will serve as a critical valuation anchor for risk assets in H2.
The Fed’s Tightrope: Cautious Use of the “Fed Put”
Fed Chair Jerome Powell continues to adopt a data-dependent, step-by-step approach. While inflation is easing, core prices remain sticky, and signs of labor market weakness have increased the weight of unemployment in the Fed’s decision-making.
Markets now expect two rate cuts by year-end, potentially lowering the federal funds target range from the current 4.25%-4.5% to 3.75%. However, after the costs of 2020’s “unlimited QE,” the Fed is more cautious in deploying broad stimulus. Should a liquidity crisis arise, any Fed backstop would likely come via targeted tools like repo operations or short-term lending facilities (e.g., CPFF, PDCF) — not blanket asset purchases.
In short: The “Fed Put” still exists — but it won’t be drawn hastily.
U.S. Equities: Rich Valuations Require Selective Optimism
Despite rising to new highs, U.S. equities are increasingly priced for perfection, with the S&P 500 trading at elevated valuation levels. The path forward depends on the realization of bullish assumptions — soft landing, Fed easing, and stable Treasury yields.
If favorable outcomes materialize (e.g., de-escalation in trade tensions, dovish Fed pivot), the market could grind higher. Still, we believe valuation discipline will dominate — it’s no longer about chasing growth stories, but finding risk-adjusted value.
Case in point: Adobe and similar software names offer:
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Subscription-based revenue stability
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Strong free cash flow
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Less speculative valuation profiles
These traits make them attractive in an environment demanding resilience and consistency.
U.S. Dollar Credibility Risks Persist — But U.S. Equities Remain Core
Since the pandemic, U.S. national debt has ballooned from $23 trillion to over $34.5 trillion — a nearly 50% increase. Interest payments alone surpassed $1 trillion in 2024. This level of fiscal expansion, while supporting near-term growth, has placed structural pressure on dollar credibility and triggered a gradual depreciation trend.
Washington is experimenting with stablecoins backed by Treasuries to create a new form of dollar circulation, but the current stablecoin market (~$220 billion in total value) is far too small to meaningfully offset broader debt risks.
Meanwhile, Trump’s signature campaign proposal — the OBBBA Act (One Big Beautiful Bill) — aims to consolidate power through:
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Major corporate and personal tax cuts
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MAGA child savings accounts
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Reduced social spending
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Centralized AI regulatory powers
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“Clause 899”: a retaliatory tax on foreign capital
These provisions, if passed, could inflate deficits further and worsen geopolitical tensions.
Yet, from a global allocation perspective, U.S. equities remain unmatched:
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Home to the largest pool of high-quality listed companies
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Still the global hub for innovation and technology
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Backed by the world’s reserve currency
Despite dollar headwinds, U.S. stocks continue to anchor institutional portfolios globally.
Invesight Viewpoint: Volatility Persists, But Clear Logic Wins
The fog is lifting, but the road ahead remains volatile. Our outlook for U.S. equities is cautiously optimistic, with the following tactical suggestions:
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Avoid excessively overvalued sectors and stocks
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Focus on high-quality names with resilient business models and stable cash flows
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Monitor developments in tariff policy, Fed positioning, and dollar dynamics
The only way to navigate uncertainty is to stay grounded in fundamentals — and befriend time.
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