It’s that time of year when those of us who are following the markets day-to-day take stock of the first six months of 2025 and, in turn, look ahead to what we can expect from the remainder of the year.

There are plenty of moving parts to consider, one of which is the future trajectory of interest rates. This was probably the biggest single obsession for markets before the Trump administration took office and, while tariff turmoil has pushed central bank decision making somewhat into the shade, it is still central to the relative attractions of different asset classes.

After all, higher rates normally increase the appeal of bonds and cash compared with stocks and vice-versa.

With that in mind, there was a striking observation in some recent commentary from investment bank Berenberg. Economist Atakan Bakiskan noting he expects no further reductions in US rates.

Consensus forecasts still have rates dropping to a 3.5% to 3.75% range by the first quarter of 2026 from the current 4.25% to 4.5%. However, if Bakiskan is right then Trump is unlikely to be happy given the very public and unsparing criticism he has aired about Federal Reserve chair Jerome Powell. Attacking him for being too slow to ease monetary policy.

Notably, having gone harder and faster on rates than its counterparts at the European Central Bank and Bank of England in 2022, the Fed has been slower to retreat than either since the current rate-cutting cycle began last year.

As my colleague Martin Gamble observes in this week’s News section, the better-than-expected jobs numbers released on 3 July make any kind of cut unlikely at the next policy meeting at the end of this month. Might this move Trump to announce Powell’s successor ahead of the end of his current term in May 2026, as has already been speculated.

The prospect of a shadow Fed chair, with investors looking for clues as to their future intentions on rates, is one which may heighten uncertainty and provide another source of volatility in financial markets.

Elsewhere in this issue, Ian Conway tees up the upcoming US earnings season with a sideways glance at the American banking sector, whose big names are always among the first to report.

There is also a really interesting look at some of the under-the-radar funds with performance track records which would put some of their more prominent peers to shame.

‹ Previous2025-07-10Next ›