Our multi-asset investment views - May 2025
We have upgraded our view on equities given the pause on reciprocal tariffs between the US and China. Read more about our views on a range of asset classes here.
Autheurs
🟢 Long / positive
🟡 Neutral
🔴 Short / negative
🔼 Up from last month
🔽 Down from last month
Main Asset Classes
🟢 🔼Equities
We have upgraded equities to positive, due to the recent 90-day pause on reciprocal tariffs between the US and China, which reduced the risk of a sudden stop in trade volume and a sharp rise in unemployment.
🟡 Government bonds
We remain neutral. While yields have risen, medium term concerns remain due to increasing debt levels and sticky inflation in the US. We prefer German Bunds over US Treasuries.
🟡 Commodities
Energy markets remain imbalanced due to increasing supply, while demand stays weak across all sectors amid growth risks. Gold continues to stand out as our preferred diversifier.
🔴Corporate bonds (credit)
We stay negative on credit, with a particular focus on the US, where technical indicators are weakening.
Equities
🟢 🔼US
We have upgraded our view on US equities. Reduced tariff uncertainty has alleviated key market concerns in the short term. This, coupled with supportive fiscal policies, and an uptick in earnings revisions, creates a supportive environment moving forward.
🟡 UK
We stay neutral on UK equities where sector composition is naturally more defensive. UK equities are less exposed to global tariff risks; however, limited fiscal headroom and persistent inflation constrain policy flexibility.
🟢 Europe ex UK
We maintain a positive view on European equities, as the implementation of expansive fiscal policies is expected to contribute to narrowing the disparity in economic growth between the US and Europe.
🟢 🔼Japan
Supportive macro conditions such as rising inflation expectations, wage growth, and loose financial conditions - as well as positive sentiment from more tariff certainty - should benefit Japanese equities.
🟢 🔼 Global Emerging Markets (EM)1
The recent 90-day pause in reciprocal tariffs between the US and China has improved the near-term trade environment, prompting us to upgrade our view. Attractive valuations and a weaker US dollar continue to provide a supportive backdrop.
🟡Asia ex-Japan: China
We remain cautious on China. While growth forecasts remain stable, there are concerns about domestic economic weakness and the inflationary impact of tariffs.
🟡 EM Asia ex China
Although Asian markets avoided immediate tariffs, their dependence on Chinese imports poses risks.
1Global Emerging Markets includes Central and Eastern Europe, Latin America, and Asia.
Government bonds
🔴🔽 US
Inflation expectations in the US are increasing, driven by factors such as a tight labour market, potential tariff impacts, and dollar weakness. This, combined with rising debt levels, leads us to hold a negative view on US government bonds.
🟡 UK
We maintain our neutral score. While valuations look attractive, a sticky labour market and wages mean that the Bank of England (BoE) is unlikely to cut rates.
🟢 🔼 Europe
We upgrade our view to positive, German bonds have a safe haven appeal. In addition, Germany’s fiscal situation is expected to remain disciplined and inflation under control.
🟡 Japan
Although the Bank of Japan held interest rates at 0.5% at its most recent meeting in May, the upward trajectory in wages and inflation means the ultimate path of interest rates is likely higher.
🟢 🔼US inflation-linked bonds
There is a significant risk of rising inflation in the US, driven by a tight labour market, persistent wage growth and potential inflationary impacts from tariffs. We upgrade our view as US inflation-linked bonds are a useful hedge against such pressures.
🟢 Emerging markets local currency bonds
We maintain a positive view on EM debt. Economic activity in EM markets has remained robust and the sector should be supported by a weakening US dollar.
Investment grade credit
🔴 US
We maintain our negative stance. Valuations are at extreme levels, and we are concerned that the backdrop for credit is starting to weaken.
🟡 Europe
We remain neutral on European IG, where spreads are more attractive compared to the US. The technical environment is favourable, and demand seems to be improving.
🟡 Emerging markets USD
We remain neutral as valuations look expensive. We are closely observing the asset class which is predominantly concentrated in Asia and therefore susceptible to tariffs.
High yield bonds (non-investment grade)
🔴US
We stay negative on US high yield. Technical indicators are weakening
🟡Europe
We remain neutral. Valuations are more attractive compared to the US, although the technical environment is showing signs of weakening.
Commodities
🔴Energy
We remain negative on energy. OPEC+ has announced a second bumper production hike for June, which has reinforced the view that the market will move further into a supply surplus this year.
🟢 Gold
While volatility is high, we remain positive on gold as central bank buying remains rampant and Chinese household demand remains strong.
🟡Industrial metals
The structural outlook is bullish for base metals but relies on robust growth assumptions, which have been called into question following the tariff announcements. We therefore stay neutral.
🟡 Agriculture
We remain neutral. With market fundamentals still in balance, the market is likely to be more driven by the ratcheting up of retaliatory tariffs, weighing down on prices.
Currencies
🔴US $
We maintain our negative view on the US dollar as inflationary pressures and efforts to address trade imbalances could lead to further weakness.
🟡 UK £
The BoE faces a delicate balance: maintaining rates may cause a recession, while early cuts could revive persistent service inflation.
🟢EU €
We maintain a positive view on the euro. We believe growth momentum should continue due to cross-border flows shifting investment away from the US.
🔴 CNH ¥
We maintain our negative stance as the currency is vulnerable to any further escalation in US-China trade tensions.
🟢 JPY ¥
We stay positive on the Japanese yen which has benefitted from safe-haven flows following the fall in sentiment globally and is a reliable hedge in our portfolios.
🟡Swiss franc ₣
We stay neutral on the Swiss franc which we see as an effective diversifier.
Source: Schroders, May 2025. The views for equities, government bonds and commodities are based on return relative to cash in local currency. The views for corporate bonds and high yield are based on credit spreads (i.e., duration-hedged). The views for currencies are relative to the US dollar, apart from the US dollar which is relative to a trade-weighted basket.
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