Quarterly Insights - Q2 2025
July 16, 2025
Dear Clients, Colleagues and Partners
INTRODUCTION
“SHOW ME THE INCENTIVES, AND I WILL SHOW YOU THE OUTCOME” ~Charlie Munger
The bond market is signalling expectations of an upcomingFed rate cut, reflecting concerns that economic growth is slowing. In contrast,the stock market is favouring cyclical stocks over defensive ones, suggestinginvestors believe growth is set to pick up.
These two perspectives are at odds with each other. If thebond market is mistaken and growth is indeed accelerating, interest rates mayneed to rise. Conversely, if the equity market is wrong and growth is actuallyslowing, stock prices, especially among cyclicals, could face downwardpressure.
Exhibit 1: The disconnect between cyclical equities makingnew highs vs bond markets pricing in meaningfully lower interest rates at theshort end of the U.S. treasury curve:
US economic growth is currently facing headwinds from risinguncertainty and slowing investment. In particular, uncertainty regarding theconsequences of tariffs and a slowdown in global trade. Furthermore, volatilityin oil prices, the resumption of student loan payments, and higher long-terminterest rates associated with the fiscal situation, is also causing majorheadwinds.
The question is whether these headwinds to growth aresufficient to push the economy into a recession.
Exhibit 2: Macroeconomists and market pundits have been toopessimistic about the growth and inflation outlook, which have not materialisedyet and resulted in a ‘positive surprise’. This in turn boosted risk appetiteand the recent rally. But just like monetary policy, it is fair to assume tradepolicy works with variable lags. Stagflation is not off the cards, and theglobal economy is not out of the woods.
Exhibit 3: Where are we in the cycle?
CONTACT US
For further information on any of our services, or if you would like to arrange a meeting with an investment manager to see how we can work with you, please get in touch.
LeifBridge Investment Services
Shard Capital Partners
Floor 6, 51 Lime Street
London, EC3M 7DQ
United Kingdom
Telephone: +44(0)20 7186 9900
Email: Info@Leifbridge.com
www.leifbridge.com
Disclaimer:
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IMPORTANT INFORMATION
LeifBridge is a trading name of Shard Capital Partners LLP. Shard Capital Partners LLP is a limited liability partnership, registered in England with registration number OC360394. Shard Capital Partners LLP Registered office:36-38 Cornhill, London, EC3V 3NG.. Shard Capital Partners LLP is authorised and regulated by the Financial Conduct Authority in the United Kingdom, reference number 538762.
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