The geopolitical backdrop remains tense with the impact of Israel’s strike on Iran still unfolding. Yet despite these developments, markets have continued to perform steadily, suggesting a growing resilience to recurring macro and geopolitical noise.

In our Q2 outlook (Defend and Spend, published before April 2), we argued that geopolitical uncertainty would adversely impact global growth. This scenario is now materializing - especially in the US, where consumers and businesses have become more gloomy. Our leading indicator hints at downside risks to the 1% consensus forecast for US growth in H2 2025.

Remarkably, risk assets seem convinced that the most intense phase of trade uncertainty has passed. Credit market valuations have completed a full round trip. After the April spike, spreads recovered sharply and valuations have returned to pre-April levels. ‘Risk’ appears to be getting used to policy uncertainty.