Economic Update – All Time High, Real-Time Risks

June unfolded as a pivotal month for global markets, delivering a full slate of macroeconomic data — including inflation prints, central bank meetings, labour reports, and housing activity. While investors remained focused on the path of monetary policy amid softening inflation trends, the month was also disrupted by a short-lived spike in geopolitical tensions. The flare-up between Israel and Iran added volatility across asset classes, underscoring the market’s ongoing sensitivity to external shocks. With the first half of the year now behind us, we take stock of recent developments and assess the implications for the second half.

Key Points:

• Geopolitical risks surged temporarily with the Israel-Iran conflict, briefly roiling markets and pushing oil prices above $80 per barrel.
• The US passed the “One Big, Beautiful Bill” Act, boosting near-term spending but raising long-term debt and inflation concerns.
• The Reserve Bank of Australia paused after multiple cuts, amid a shift to a more fragmented decision-making process, increasing policy uncertainty.
• The US economy shows clear signs of slowing, with mixed labour market data and stagflation risks pushing Fed rate cuts later in the year.
• The UK economy remains fragile, balancing soft inflation with weakening industrial output and geopolitical uncertainty.
• China’s recovery shows mixed signals, with resilient consumption but ongoing manufacturing weakness and subdued price pressures.
• Europe’s inflation continues to ease, prompting the ECB’s eighth rate cut since June 2024, but geopolitical tensions and trade issues cloud the outlook.

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