Investment Monthly: Positive drivers boost market optimism amid progress on trade deals

Key takeaways

The higher fiscal deficit concerns caused by the One Big Beautiful Bill, which included significant tax and spending cuts, and broad policy shifts, will likely be offset by expectations of Fed rate cuts and benign inflation. Meanwhile, solid Q2 earnings growth reinforces our US overweight positions in IT, Communications, Industrials and Financials as they benefit from the bill and structural trends. More regulatory clarity (e.g., GENIUS Act) is also a positive.

Following the US-Japan trade deal, which lowered Japanese tariffs to 15%, the US and the EU also announced a 15% tariff rate on most EU goods sold to the US, plus additional investments in US energy products and military equipment. These deals have de-escalated global trade tensions substantially. We maintain a risk-on stance and mitigate uncertainty through multi-assets, including quality bonds (e.g., UK gilts) and gold.

While China’s 5.2% GDP growth for Q2 has raised hopes of reaching the government’s full-year target of around 5%, economic data remain mixed. The Chinese authority has introduced supply-related measures to address the deflationary pressures caused by overcapacity in the areas of solar, steel, auto, lithium batteries, etc., which boosted market sentiment. In Asia, we remain overweight in China, India and Singapore, and neutral in Japan following the loss of its ruling coalition’s majority in both parliamentary houses.

https://www.hsbc.com.my/wealth/insights/asset-class-views/investment-monthly/positive-drivers-boost-market-optimism-amid-progress-on-trade-deals/

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Publish Date: Fri, 01 Aug 2025, 07:04 AM

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