Please note the political opinions expressed below are those of the author himself, and do not necessarily reflect the opinions of JP Fund Services AS.
Since April this year I have spent most of my time in the UK, helping my family whilst my beloved Sister battled against cancer. Unfortunately, she lost her battle and last week we laid her to rest.
Whilst I was able to maintain our weekly technical analysis – Chart Book – family matters caused me to spend too much time away from the markets to provide the kind of insight and analysis that many of my readers enjoy.
I am now back in Portugal, at my desk, and catching up as fast as I can, so normal service will resume asap. In the meantime, I would like to thank everyone for their concern and patience in advance.
With that, here is an overview of what’s been happening over the past 6 months, and some comments on how we could look to play the markets over the coming quarter.
Market & Macro Overview: April → September 2025
1. April “Shock”, Policy Reversal & Volatility Reset
In early April 2025, markets experienced a sharp shock tied to sudden tariff escalation moves announced by the U.S. administration (“Liberation Day” tariffs).
The tariffs announcement triggered panic selling globally; bond yields rose, equity markets sold off hard, and volatility spiked.
However, shortly thereafter, the U.S. ‘paused’ or scaled back many of the tariff plans, which removed the immediate tail risk and allowed markets to stabilize and rebound.
That reversal was critical – had the tariff regime stayed, the risk of a hard landing or deeper global de-risking would have been far greater.
In short: April was a stress test that nearly broke markets; the U.S. administration’s retreat avoided a deeper crash.
2. Recovery, Rotation & Regime Shift
Following April, market dynamics shifted meaningfully:
Rebound in equities: Risk assets recovered. The S&P 500, Nasdaq, and others reversed losses and moved into positive territory for the year by mid-May.
Rate expectations & fixed income reappraisal: With inflation – and especially forward expectations – remaining under watch but not wildly exploding, markets began to price in the possibility of Fed rate cuts later in the year.
Sector and style rotation: With interest rate relief priced in, more cyclical, value, and small-cap stocks got traction. Growth/mega-cap, especially where valuations were stretched, faced headwinds from multiple angles.
Emerging markets & FX backdrops: After sharp stress, EM markets saw bouts of recovery – especially where central banks intervened or where external support was pledged. But capital flows remain volatile, with risk of sudden reversals.
Private markets recalibration: Venture capital and private equity activity remain uneven – while exit activity and fundraising have shown pockets of strength (especially in AI/tech), much of the broader private markets scene is grappling with higher cost of capital, tighter liquidity, and increased selectivity.
Key Themes & Structural Developments
These are not just temporary blips – they reflect deeper currents.
|
Theme |
Description & Significance |
Implications / Watch Points |
|---|---|---|
|
Policy & Regime Risk Returns |
The April tariff shock reminded markets that geopolitical and trade policy remain credible sources of tail risk. | Monitoring U.S. trade and fiscal policy is now table stakes. Even rumour or leaks can drive outsized volatility. |
|
Central Banks Still Driving the Show |
The trajectory of interest rates, timing of cuts, and communications are central. Many markets are sensitive to “Fed speak.” | Rate cut expectations must be carefully modelled: inflation surprises, sticky wages, or hawkish pivots can derail forecasts. |
|
Concentration Risk in Tech / AI / “Magnificent Seven” |
A disproportionate share of equity performance is concentrated in a few large tech/AI names. That heightens fragility if sentiment or regulators shift. |
Overexposure to the top names carries asymmetric downside. Consider diversifying into less crowded areas. |
|
Defence, Security & New Tech as Investment Axes |
Given the evolving geopolitical tensions and renewed focus on defence, sectors tied to aerospace, cybersecurity, surveillance, and dual-use tech are receiving attention. |
In a portfolio tilt, these “security & systems” sectors may serve as strategic tilts or diversifiers. |
|
Volatility Remains Elevated & Asymmetric |
Even though the worst of the April stress receded, markets now live in a world where tail events are closer at hand. |
Hedging, option strategies, and dynamic risk overlays are more critical than before. |
|
Capital Flows & Index Weights Matter |
Changes in index rules, foreign ownership limits (e.g., Saudi Arabia loosening foreign caps) or inclusion shifts can drive multi-billion flows. |
Be alert to index reweights, tracking ETF flows, and regulatory shifts in key markets. |
|
Private / Venture Calibration & Bifurcation |
The private market is bifurcating: AI and frontier tech are attracting capital, while more traditional sectors face headwinds in raising money. |
In assessing private allocations, be more discriminating on business models, runway, and exit optionality. |
Notable Events Since April 2025
Here’s a curated list of “must-have-on-your-radar” events:
April Tariff Shock & Reversal
- Abrupt tariff escalation by the U.S. triggered global equities meltdown.
- Subsequent “pause” by U.S. leadership was pivotal in quelling systemic stress.
Mid-Year Earnings & Growth Surprises
- Despite policy uncertainty, many large-cap firms posted solid earnings, helping restore confidence.
- AI / cloud / semiconductor segments remain disproportionate drivers of EPS growth.
Fed / Central Bank Messaging & Market Reaction
- Each Fed meeting and speech has had outsized influence on yield curves, equity flows, and volatility.
- Markets now more finely attuned to nuance: a wink or “dot-plot tweak” can cause asset shifts.
Emerging Markets & Sovereign Moves
- Argentina’s assets rallied after U.S. announced strong support via currency swaps and potential bond purchases.
- Saudi Arabia hinted at loosening foreign ownership caps on its stock market, which triggered a sharp rally.
Innovations & Adjacent Themes
- HSBC / IBM launched a “quantum bond trading trial” – an early step toward quantum in capital markets.
- The AI / tech dominance narrative continues; investors remain both excited about upside and nervous about peaking valuations.
Corporate & Sector Signals
- TotalEnergies cut buybacks due to oil price pressure (signalling stress in energy sector).
- Broader ESG / energy transition trends continue to reallocate capital flows within energy, clean tech, and green infra.
Regulation / Governance & Market Structure Moves
- Watch for index re-weighting, foreign ownership caps, and regulatory reforms in key markets (Saudi example above).
- Also, exchanges and market infrastructures are upgrading tech stacks (e.g. cloud, AI, quantum readiness) to handle next-gen demands.
Risks & Wild Cards Worth Monitoring
Policy regime shifts:
A reintroduction of tariffs or escalation of trade conflict could trigger a re-test of April’s extremes.
Inflation surprises:
If inflation proves stickier or accelerates anew (via wages, supply chains, energy), central banks may resist cuts or even hike again.
Credit stress / defaults:
In a higher-rate world, stressed credits, especially in high-yield, leveraged borrowers, could spark contagion.
Liquidity risk:
Underlying liquidity conditions may be more fragile than they appear; large repositioning or shocks may amplify moves.
Geopolitics / conflict escalation:
Escalation in hotspots (Middle East, Eastern Europe, Asia) can rattle risk assets, energy prices, and safe-haven flows.
Valuation multiples correction:
The concentrated valuation premium in tech/AI could reverse if growth expectations disappoint or regulatory pressures emerge.
Capital flow reversals in EM:
Countries with current account deficits, FX stress, or weak fiscal buffers are vulnerable to sudden outflows.
What I am looking at now I am back:
Tactical & Strategic Thinking
Reaffirm macro base case
Reset expectations: Make a view on Fed timing, inflation trajectory, and policy regime. Everything else rides on that.
Use options / hedges more aggressively
Given the elevated tail risk environment, options hedges, volatility overlays, and dynamic hedging are more appropriate.
Rotate carefully / avoid overconcentration
I won’t double down blindly on the “megacaps.” Look for unloved sectors or areas with positive optionality (e.g. AI, security, infrastructure, defence).
Watch capital flows & momentum signals
Flows often lead price. Track ETF inflows, index reweights, and fund positioning.
Diversify asset exposures
I won’t just lean equities. Consider duration (cautiously), inflation hedges, alternatives, even tactical allocations to cash or hedged strategies.
Incremental exposure / staging
Reevaluate private / illiquid allocations
Build scenario plans
Because uncertainty is high, I’ll consider scaling in rather than all-in re-entry. Use trigger-based entries tied to policy or technical breaks.
For private/venture allocations, I’ll lower my bar for liquidity, runway, and optionality. Being aware of overpaid deals or overly aggressive valuations.
Prepare for multiple regimes (hawkish pivot, soft-landing, policy reversal, COVID-like shock). For each, I’ll define playbooks.
Finally. This year has underscored how politics can dominate market direction, and I see no reason for that to change. I will continue tracking and commenting on policy moves on both sides of the Atlantic, since they remain a critical driver of risk and sentiment.
That lens has shaped my own positioning: it justified holding gold as a hedge in recent years and pushed me back into cryptocurrencies during their sharp correction. At the same time, I’ve remained uneasy about equity market strength, perhaps underestimating how much the so-called “Big Seven” could sustain index levels. The dollar’s persistent weakness against European currencies has also been puzzling, and the recent speeches at the United Nations by Trump and Argentina’s president only highlighted the political undercurrents I’ve been flagging for years.
In the end, markets often move in ways that seem irrational in the moment – but that unpredictability is part of the business, part of what keeps us engaged. For me, the excitement lies in diving back in, scanning the landscape for real opportunities. They’re always there, in bull markets or bear markets. The challenge – and the privilege – is to find them, and once again, advise my readers accordingly.
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