The escalation between Israel and Iran only unsettled market participants in the short term. Air strikes on Iranian nuclear facilities and counterattacks with drones and missiles led to a rise in oil prices of over 10% within a few days. However, they have since returned to pre-conflict levels. Gold and the US dollar benefited briefly as classic safe-haven assets. The market reaction has remained moderate so far - an indication that investors are assuming a limited escalation and consider the conflict to have been resolved for the time being. Nevertheless, the markets are caught between geopolitical uncertainty and monetary policy hope. The recently published consumer data from the USA was largely weaker than expected, while consumer prices remain high. The imminent end of the 90-day negotiation period for US import tariffs remains a key uncertainty factor. If the tariff negotiations with Washington fail, there is a risk of trade escalation with potentially significant consequences for transatlantic supply chains, company margins and ultimately also inflation. Sectors with a high dependency on imports, such as mechanical engineering, automotive and chemicals, would be particularly affected. This poses a dilemma for the Fed: On the one hand, weaker consumer data argues for an easing of monetary policy. On the other hand, new tariffs could make imported goods more expensive and thus counteract the disinflationary trend. A return of protectionist measures would therefore severely restrict the Fed's scope for monetary policy - especially if geopolitical tensions drive up energy prices at the same time.
Stock markets were undeterred by the conflict between Israel and Iran and only dipped briefly. The recent 5.1% rise in the US stock market in local currency terms in June suggests a certain optimism, although this is not reflected in the latest economic data from the US. If the downward trend in consumption continues, the lofty valuation level is likely to prove too high. This is particularly important in light of the ongoing trade conflict, which will enter a new phase in July and - depending on how it develops - could favor a stagflationary environment in the US. We continue to assume that the European stimulus packages will support local companies. This is also likely to be necessary, as the Euro's rise of almost 14% against the US dollar alone has made exports from Europe to the US more expensive over the past six months. This is likely to weigh on consumption in a similar way to trade tariffs, the exact nature of which is expected to become clearer in the course of July.
Both the European Central Bank ECB and the Swiss National Bank SNB lowered their interest rates last June - the eighth rate cut for the ECB and the sixth for the SNB. Meanwhile, the US Federal Reserve left its key interest rate at 4.25% to 4.50%, much to the displeasure of the US President. The Fed justified this unanimous decision by citing persistently stubborn inflation, a still robust labor market and the fact that it wanted to wait for further data on the effects of US customs policy before reacting with monetary policy. In view of the events of the past six months, the US dollar, as measured by the US Dollar Index, experienced its weakest first half-year since 1973. Commodities such as oil, precious metals and industrial metals have become much more expensive in US dollar terms. The combination of high US interest rates, a weak US dollar and higher commodity prices is clouding the outlook for the US economy and increasing the likelihood of a stagflationary scenario.
The term TACO was coined in May 2025 by a journalist from the Financial Times and stands for “Trump always chickens out”. It refers to a certain behavioral pattern of the US president: According to this, Trump tends to fundamentally withdraw or at least greatly weaken the tough measures he has threatened against other countries. A deadline set by the US President for tariff negotiations with various countries also expires on July 9. If these fail, steep tariffs on car imports, steel and aluminum, among other things, are likely to come into force. It is impossible to predict whether the US President will back down this time too. If he behaves in a similar way to the past, it can be assumed that the tariffs will be much lower than threatened - but on the other hand, the risk that he will not back down should not be neglected. Even if there is talk of successful negotiations and the 10 percent basic tariff remains in place, these are still historically high burdens that the global economic system has not seen since the Second World War. We are therefore already in a new, highly protectionist world. Diversification as the only “free lunch” therefore remains an important cornerstone of our investment strategy. As before, we remain cautiously optimistic, holding a large part of the portfolio in Swiss francs and, in addition to traditional investments, a sizeable allocation to precious metals. The recent price gains on the US equity markets have pushed implied volatility to attractive levels and opened up favorable conditions for hedging strategies. We are positioned with foresight and are aligning the portfolio to be as “weatherproof” as possible.