Financial tectonics or just a summer breeze?

Either way, on the grand scale of things, few developments were more important financially than these tariff deals – if that’s the right word for mostly unilateral and seemingly idiosyncratic decisions.

In July, we could also conclude that the US dollar had its weakest half-year performance since 1973. Harvard’s Kenneth Rogoff warned that the erosion of trust in the U.S. dollar – accelerated by Trump-era tariffs and fiscal policies – could spark a systemic shift reminiscent of the 1971 Nixon shock. And the Bank for International Settlements (BIS) warned of potential systemic paradigm shifts.

So, with all this brouhaha, well-qualified as it was, what happened in financial markets? Not much.

The MSCI World Index, the predominant gauge for global stock markets, rose by 2.0% in local currency. That’s better than average, but hardly sufficient to raise many eyebrows. Yes, it was pulled up by the US stock market, but even STOXX Europe 600 – clearly on the losing end of the tariff deal – rose by 1%. And the Bloomberg Global Aggregate, widely considered the world’s leading fixed income index and, incidentally, underwater for more than six years now, rose by 0.4%. Nice and steady.

The US dollar, for its part, rose by more than 2% against the euro. For all I know, just a short-term rebound, but at least not signalling any immediate erosion of trust – on the contrary.

Were financial markets oblivious to the seismic changes underfoot? Perhaps. I honestly believe that many of Trump’s policies are harmful to the global economy – the US economy being no exception here. As for their impact on growth and inflation, the worst is probably to come; such changes may take years to ripple through. But maybe, just maybe, they’re not as detrimental as many may fear right now? Markets do have a tendency to make adjustments – like, in this case, new trade patterns – that you can’t plan for in advance.

The most important explanation, though, is probably the strength of listed companies – on both sides of the Atlantic. Earnings estimates for the next 12 months rose not only in the US (S&P 500), but also for the STOXX Europe 600 (not by much, that’s true, but rise it did). If there is a structural change underway, it is not yet priced in by financial markets. For now, earnings rule.

And that’s an opportunity to remind you, once again, that this is what we invest in. We do find many governments badly run, but we also find a large number of companies that are very well run indeed – and that’s where we put your money.

The idea is that you can go on vacation without losing sleep. In July this year, you certainly could.

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