Latest investment update

Published: June 2025

Stock markets around the globe had a strong month in May. This momentum was carried on from April when US President Donald Trump paused most of the tariffs (extra taxes on goods from other countries) that were announced on ‘Liberation Day’. The positive news kept coming when the US and China agreed to lower these tariffs to 50% for 90 days.

Also, the US economy is showing continued signs of strength. In April, inflation was lower than expected at 2.3%, and 177,000 jobs were created.

It was a positive story by the end of the month for Europe too. Strong company earnings and hope that trade tensions might get better bolstered stocks. President Trump decided to hold off rolling out 50% tariffs against goods from the European Union until July – suggesting a deal might get agreed before then. 

Despite stock markets rallying last month, investors’ attention is shifting away from tariffs on to something new – tax cuts. President Trump wants to cut taxes which was a big part of his first term in office. Taxes help fund government spending, and without any signs of the White House changing its spending habits, government debt could rise by around $4 trillion over the next 10 years. These concerns caused long-dated (30+ years) US government bond yields to rise, meaning prices fell.

Lilian Chovin, Head of Asset Allocation at Coutts, the bank behind Royal Bank Invest, said: “As long as the US economy keeps growing, markets can handle higher bond yields. In fact, while long-term US yields have risen recently, 10-year yields have come down and remain lower than where they were earlier this year.”

Government bond yields have also been going up in Japan due to rising government debt causing a drop-off in demand from investors. While the rest of the world have been lowering interest rates, the Bank of Japan has been raising rates, adding to the pressures on bond prices.

More recently, demand for Japanese government bonds has started to stabilise as investors become more comfortable with the outlook of the central bank’s rapid rate hiking cycle. 

Markets have bounced back to where they were before the tariff news. But there’s still some uncertainty and risks linked to the evolving US trade policies. That’s why we’ve decided to reduce how much we invest in global stocks.

Lilian said: “While things are looking better, it’s smart to be careful until we know more about future policies and the impact it’ll have on businesses and the global economy. Still, we believe the overall outlook for earnings and the business cycle is positive, so we’re still overweight global stocks – just not as much as before.”

Using the profits taken from reducing our global stocks exposure, we’ve invested more money into Japanese government bonds. These are now offering better yields than they have in over 20 years. So the chance of future returns looks better because any fall in yields would mean prices rise. 

Here you’ll find our previous investment market updates.