Investment Monthly
Key takeaways
- Our baseline scenario is that tariffs settle close to current levels. US growth drops below trend while inflation rises
- But policy uncertainty remains high, creating the risk of a sharper downturn and elevated cross asset market volatility
- In China, policy support measures for households, signs of stabilisation in the property market, and expansionary fiscal policy should help mitigate lingering external risks
- Trade disruption is likely to have diverging effects on Asian economies while macro policies should be supportive for growth
Macro Outlook
- Our baseline scenario is that tariffs settle close to current levels. US growth drops below trend while inflation rises
- But policy uncertainty remains high, creating the risk of a sharper downturn and elevated cross asset market volatility
- In China, policy support measures for households, signs of stabilisation in the property market, and expansionary fiscal policy should help mitigate lingering external risks
- Trade disruption is likely to have diverging effects on Asian economies while macro policies should be supportive for growth
Policy Outlook
- The Fed is in “wait and see” mode. We expect some further gradual policy easing later this year, as rising growth concerns offset inflation worries
- The ECB policy rate should move into accommodative territory. German fiscal stimulus is likely to support growth in 2026
- Elevated global trade uncertainty is expected to prompt diverging policy responses across Asia. The Indian and Korean central banks are expected to ease
- Chinese authorities have pledged a “more proactive” macro policy but may limit fiscal measures on a substantial de-escalation of US-China tariffs