Investment Monthly: Building multi-asset resilience against geopolitical uncertainty

Key takeaways

The geopolitical conflict in the Middle East has caused oil prices to spike, while gold and quality bonds held up well and became negatively correlated with equities. Despite the de-escalation of tensions, uncertainties around trade tariffs, inflation and growth still linger. It is vital to build resilient portfolios through diversification and quality assets, which has worked well in recent market volatility.

US earnings growth is expected to be bolstered by continued rate cuts, AI innovation, structural trends and deregulation, benefitting Industrials, IT, Communications and Financials. We upgrade European Utilities to overweight due to improved earnings momentum, cheaper valuations and Germany’s infrastructure plan. The tech revolution and policy tailwinds are positive for Industrials, Communications, Consumer Discretionary and Financials in Asia.

Following a rate cut pause in June amid tariff and policy uncertainties, the FOMC is expected to resume easing in September. Despite concerns about the US fiscal deficit, US Treasuries are still fundamentally resilient. Yet, rate volatility warrants a neutral stance for now. While the Bank of England reinforced a gradual approach to easing, we expect another 1.25% of rate cuts from this easing cycle and remain positive on UK gilts for their attractive valuations against a backdrop of slowing growth. While a potential rate hike in October is likely, JGB yields remain unattractive.

https://www.hsbc.com.my/wealth/insights/asset-class-views/investment-monthly/building-multi-asset-resilience-against-geopolitical-uncertainty/

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Publish Date: Tue, 01 Jul 2025, 12:02 PM

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