2025-07-30

2nd quarter 2025 market overview

Equity market

In the US, uncertainty over proposed trade tariffs (duties), their constantly changing levels and timing, as well as the “big, beautiful bill” on tax and budget reform, continued to disturb stock markets around the world. The war in the Middle East has also added fuel to the fire.

Nevertheless, investors have regained confidence and risk appetite. This was boosted by favourable corporate performance in the first quarter of the year.

Finally, major US equity indices reached record highs, but the significant depreciation of the US dollar led to a moderate increase in euro returns. The S&P 500 index of the largest US companies rose by 10.9% over the quarter but returned 2.0% in euro terms. High-tech stocks were the strongest performers, with the Nasdaq 100 index, which reflects the direction of the US economy, rising by 8.1% in euro terms. The index reflecting the share prices of the Magnificent Seven rose by an even bigger 11.2% in the quarter.

Bond market

The initial bond market was very active. The rhetoric and actions of the European Central Bank (ECB) and the US Federal Reserve (Fed) were different.

In the euro area, where inflation has been close to the target level of 2.0% for a long time, the ECB has consistently lowered the base rate to 2.0%.

In the US, uncertainty about the economic impact of trade tariffs (duties) and tax and government budget reform has kept the Fed from cutting interest rates. The US dollar base rate is currently at 4.5% and one cut of 0.25% point is still expected before the end of the year.

Despite the large volatility at the beginning of April this year, European sovereign and investment-grade corporate bonds appreciated by around 1.5% to 2.0% during the quarter, while the corporate risk premium stabilised and is close to five-year lows.

Commodities market

Global equity markets have recovered during Q2, with a corresponding reduction in demand for safe haven assets.

The price of gold in US dollar terms rose by almost 6.0% in Q2 but fell by 2.8% in euro terms due to the depreciation of the US dollar.

The largest changes in both world equity and gold prices were observed at the beginning of the quarter, before becoming more stable thereafter. Recently, the US dollar has started to appreciate against the euro again, which means that the gold price in euro terms will rise.