Markets spent July on edge as the Trump administration escalated its tariff campaign. Levies were negotiated generating global trade tensions and uncertainty around demand, production, and growth, while also yielding large-scale agreements including significant bilateral investments and commitments^{1 2}. At the same time, the Federal Reserve kept rates unchanged, maintaining its data-dependent stance despite mounting political pressure from the White House^{3 4}.

By mid-July, focus shifted to the earnings season. Upside surprises — particularly among AI-driven tech giants — dominated the narrative⁵. Macroeconomic data was mixed: US GDP rebounded in Q2, though payrolls disappointed⁶. China held steady on the surface, even as slowing investment and ongoing property weakness pointed to softer momentum ahead. The Eurozone’s modest expansion, paired with weaker retail sales, reflected a mixed economic picture amid easing inflation but persistent trade risks⁷. Equities hit all-time highs before consolidating; Bitcoin reached record levels, and fixed-income markets swung with each shift in trade, monetary, and corporate signal.

In August, earnings season continued to dominate headlines, with more than 80% of companies beating revenue and profit expectations⁸. Companies such as Nvidia, Palantir, and UnitedHealth led some of the month’s most notable moves. Meanwhile, Trump’s trade agenda only intensified, introducing new tariffs on semiconductors and pharmaceuticals⁹. Institutional noise also rose as the president advanced dismissals and threats toward the Federal Reserve, seeking greater influence over the monetary policy¹⁰. Seasonally low liquidity, fragile Russia-Ukraine negotiations, and expectations of September easing, kept markets volatile.

September began with moderated optimism as weaker-than-expected US employment¹¹ and inflation data led markets to even speculate on a 50-bps Fed rate cut. Along with strong corporate earnings, this kept stocks in positive territory. In Europe, the ECB kept rates unchanged¹², citing confidence in the eurozone’s resilience despite inflation, european stocks finished in positive territory. Political disruptions were present, including the French prime minister’s resignation¹³, as well as the assassination of Representative Kirk in the US. China showed weak production and consumption¹⁴, while Japan signaled potential monetary tightening¹⁵. The dollar weakened, Bitcoin remained steady, and gold hit record highs. As for geopolitical tensions, those persisted, with new EU sanctions on Russia¹⁶ and an Israeli attack on Doha¹⁷.

Optimism was reinforced later in the month by the Fed’s 25-bps rate cut, supported by hopes for improved US-China relations and better jobless claims¹⁸. However, shortly, new tariffs¹⁹, higher visa costs, signs of stagnation in Europe²⁰ and concerns in Germany²¹ weighed on the market, along with the risk of a US government shutdown, which gained prominence in the last days of the month²². The S&P 500 nevertheless finished the month at record highs, closing the third quarter of the year with a robust 7% gain. However, these last events gave the end of the month a more cautious tone.

Taking the above into consideration, we emphasize the value of maintaining a well-diversified portfolio across both asset classes and regions. With trade policy shifts, geopolitical tensions, and evolving monetary stances shaping market dynamics, active management remains key. Thoughtful asset allocation and careful security selection provide the best foundation for navigating volatility and preserving balance in portfolios.

Below, you can find a brief summary of the allocation views for the upcoming months from some of our key partners.

United States Equities
Morgan Stanley and BlackRock are both overweight on US equities, citing strong earnings potential. Morgan Stanley favors large caps. Meanwhile, Franklin Templeton is bullish on small caps, pointing to their recent rally and resilience following rate cuts. Ninety One takes a more neutral view, but notes that many US-listed firms earn offshore revenues and could benefit from a weaker dollar. In terms of style, both Morgan Stanley and Ninety One favor quality equities: Morgan Stanley sees quality as a defensive stance amid slowing growth, while Ninety One emphasizes resilient companies with strong earnings as central to portfolio positioning, especially in a lower-rate environment.

Europe Equities
Morgan Stanley and BlackRock are both neutral overall on European equities—Morgan Stanley favors German mid caps and banks, while BlackRock sees potential in sectors tied to defense, infrastructure and financials. Franklin Templeton is more optimistic, citing improved financial conditions, reform momentum, and valuation discounts as catalysts for growth. All three managers see the financial sector as a promising area within the region. In addition, Morgan Stanley and Franklin Templeton both see potential in European cyclicals. Morgan Stanley highlights structural growth drivers within the region, while Franklin Templeton finds valuations appealing and expects earnings and multiple expansion if economic activity improves.

Emerging Markets Equities
Morgan Stanley and BlackRock are both neutral on emerging market equities—Morgan Stanley sees support from resilient US growth and global AI trends, while BlackRock notes favorable valuations and policy but remains cautious due to geopolitical risks. Franklin Templeton is more optimistic, expecting strong earnings growth in EMs, especially in countries like India. Ninety One also sees structural improvements and reduced volatility as reasons to rethink EM allocations in portfolios, emphasizing the asset class’s evolving quality and global relevance.

US Fixed Income
Morgan Stanley is underweight US duration, expecting short-term yields to rise with stronger growth and fewer rate cuts. BlackRock is neutral on Treasuries, sees short-term bonds as cash-like, and expects long-term yields to fall if the labor market softens. On credit, Morgan Stanley favors high yield over IG due to tight spreads and poor convexity; Schroders is cautious on both, citing stretched valuations. As for BlackRock, it prefers short-term IG, is underweight long-term IG, and sees HY as relatively more attractive. All three asset managers identify ABS and MBS as high-conviction opportunities within fixed income, citing attractive yields, solid fundamentals, and supportive structural trends.

European Fixed Income
Morgan Stanley favors European fixed income for its wider spreads and lower default rates, with a particular preference for high yield given its stronger income profile. BlackRock also sees value in developed market government debt outside the US, citing more attractive pricing relative to compressed spreads in global IG credit.

Emerging Markets debt
Morgan Stanley is overweight Emerging Markets hard currency debt, citing lower default risk and attractive quality-adjusted spreads despite tight valuations. They are neutral on local currency, noting strong USD performance but weaker returns in other currencies like the euro. Schroders is broadly constructive, seeing value in EM high-yield dollar debt and local rates, including euro-denominated instruments—where Morgan Stanley is more cautious. BlackRock is underweight EM hard currency, viewing spreads as near historical averages, and selectively favors local currency debt in countries with higher real interest rates.

Extra Edge: Infrastructure & FX Carry
Some asset managers are finding tactical opportunities beyond most traditional asset classes. Morgan Stanley and BlackRock both see value in adding carry through FX strategies. Morgan Stanley highlights FX as a way to boost portfolio return. BlackRock notes that FX hedging is now a source of income and exemplifies this with 10-year government bonds from France or Spain, which—when currency hedged back into US dollars—offer more income than US investment grade credit, with yields above 5%.

The other edge is infrastructure: Franklin Templeton identifies listed infrastructure—especially utilities—as a long-term growth play. Utilities, which include companies that provide essential services like electricity and water, are being reshaped by the surge in AI and cloud computing, driving massive investment in power grids and generation capacity.

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