Blog: You, us, everyone

🧭 Macroeconomic Outlook – June 2025

“Storm Clouds Return: Trade Tensions, Fiscal Uncertainty, and Bond Market Strain”

🔥 1. Trade War Rhetoric Resurfaces

Markets had started recovering on hopes of renewed trade talks, but Donald Trump reignited tensions by threatening the EU and Apple with steep tariffs:

• This move revives fears of global supply chain disruption and renewed protectionism.

• Immediate impact includes increased equity market volatility, a pullback from risk assets, and a flight to safe havens.

📉 Conclusion: A new wave of trade hostilities could undermine business confidence and complicate central banks' balancing act.

💸 2. Bond Market Warning Signs

This week saw weak demand for long-term government bonds, particularly in the U.S.:

• The 20-year Treasury yield hit 5%, a level signaling:

  • Rising inflation concerns.

  • Increased fiscal and political risk premium.

  • Reduced appetite from traditional buyers (possibly China, Japan, institutional investors).

🔺 Yield pressure isn’t limited to the U.S.—developed markets globally are seeing rising yields as bond investors grow cautious.

🧾 3. U.S. Fiscal Policy: Stimulus with Consequences

Congress just approved a new tax cut package, which brings short-term economic stimulus but longer-term debt sustainability concerns:

• This will widen the fiscal deficit and increase Treasury issuance.

• Result: risk of crowding out private investment and further upward pressure on interest rates.

🧮 Markets are already reacting, pricing in higher borrowing costs amid limited investor enthusiasm for new long-dated U.S. debt.

⚖️ 4. Central Banks Under Pressure

With rising bond yields, renewed trade risk, and fiscal expansion, central banks like the Federal Reserve, ECB, and BoE face a difficult path:

• Keeping rates low could fuel inflation or undermine market confidence.

• Raising rates could stifle growth and worsen debt service burdens.

🎯 The Fed, in particular, faces a growing policy dilemma: balance inflation control with financial stability.

📊 Summary Table

June is marked by high macroeconomic uncertainty. Markets are caught between a still-resilient economy and growing headwinds from:

• Renewed trade disputes

• Rising long-term interest rates

• Aggressive fiscal policy

• Geopolitical instability

🛑 The risk of a policy misstep—either too much fiscal stimulus or premature monetary tightening—is high. Investors are becoming more selective and defensive as warning signs multiply.