By Dongyue Zhang, head of investment specialists APAC, multi-asset investment solutions

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With the 90-day suspension on US tariffs due to expire in early July, investors are bracing for a return to heightened volatility. As the countdown begins, global markets are entering a critical phase; one shaped not just by policy uncertainty, but by a deeper shift in the world’s economic power balance.

While a return to the most extreme tariff levels appears unlikely, a complete rollback to pre-dispute norms is equally improbable. Countries with trade surpluses and globally integrated sectors, like industrials and semiconductors will be most exposed, while domestic or service-oriented sectors and trade deficit countries may be relatively insulated. Investors will face higher chances of dollar depreciation and continued global multipolarity, influencing currency and risk asset valuations.

Markets will stay volatile, especially around major deadlines, though sharp retests of April lows are unlikely unless other shocks occur. Impacts will still vary by region and sector, and the market will continue to adjust to a new equilibrium as global power balances shift, and the US dollar faces more structural headwinds.

US market recovery holds

US equities have recovered strongly since April, bolstered by resilient earnings and improved valuations. However, the sustainability of this rally hinges on the evolving trade narrative and President Trump’s unpredictable negotiating style, leaving investors to focus on short-term tactical positioning around key policy dates.

While mega cap tech stocks, the so-called “Magnificent 7”, remain market leaders, elevated valuations leave them vulnerable to shifts in interest rate policy or regulatory developments. At the same time, thematic exposure to artificial intelligence (AI) and digital infrastructure continues to attract capital, alongside small caps potentially benefiting from corporate tax cuts.  

Still, the broader picture for US assets is mixed. Valuations remain high relative to other regions, and the technical backdrop is increasingly supportive of international diversification.

“Sell America”

The first half of 2025 saw a notable weakening of the US dollar, driven by what many are calling a “Sell America” trend. Structural depreciation pressures are mounting, stemming from policy uncertainty, stronger nominal growth in Europe and Japan, and a quiet but deliberate US shift toward rebalancing trade flows by tolerating a weaker currency.

Near-term support for the dollar may materialise if the Federal Reserve (Fed) pauses or US tax policy changes, but the longer-term trend suggests further weakness. The implications are twofold; if the decline reflects waning confidence in US governance, American assets may underperform while traditional safe havens like gold thrive. Conversely, if the move is driven by slower growth or monetary easing, global risk assets may find fresh support.

We expect the Fed to cut rates twice in the second half, 25 basis points each, likely starting in Q4. While inflation remains sticky and fiscal policy remains loose, the central bank has room to manoeuvre thanks to solid underlying activity and improved financial conditions.

Yet the Fed is not in a rush. Upside inflation surprises or stronger-than-expected stimulus could quickly reduce the scope for further easing.

Beyond the US

Given the complex mix of macro and policy risks, portfolio resilience will hinge on country and asset diversification.  

The case for international allocation is bolstered by fading US exceptionalism. As capital rotates into undervalued and reform-oriented markets, investors willing to venture beyond the US may find more balanced risk-reward profiles. European and Chinese valuations are currently more attractive, than in the US. With increased fiscal and defence spending in Europe and policy easing in China, there is potential for continued capital flows into these regions in the second half of the year.  

We are also seeing compelling opportunities across global government bonds, high-quality credit, infrastructure, private credit, and real estate.

Gold will also remain a strong haven, especially if market weakness is driven by declining confidence in US policy. However, other diversifying assets, like renewable infrastructure, social housing, and mining royalties, also offer uncorrelated income and can help protect portfolios during market selloffs.

The outlook

The second half of 2025 promises no shortage of headlines, but for investors, the greater challenge lies in discerning signal from noise. Trade tensions will come and go, but the larger story is one of global transition. As the world moves toward multipolarity, and policy unpredictability becomes the norm, flexibility and strategic diversification will be essential.

Investors should be prepared not just for more volatility, but for more opportunity.