As Global Stock Rallies Continue, the Dollar Remains Steady

Global stocks kicked off the second half of the year on a strong note, extending a record-setting rally amid growing confidence that the U.S. economy can weather the uncertainties tied to President Donald Trump’s trade policies. Investors continued to look past short-term volatility, focusing instead on solid corporate fundamentals and optimism around central bank policy.

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The MSCI All Country World Index climbed for the fourth straight day, having already closed at a record high on Monday. In Asia, equities added 0.3%, while European equity futures edged up 0.1%. Meanwhile, S&P 500 futures dipped 0.2% after the index capped off its strongest quarter since December 2023.

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Elsewhere, Treasury prices gained and gold rose for the second consecutive session as investors sought safety amid lingering macroeconomic concerns.

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Jun Bei Liu, founder and lead portfolio manager at Ten Cap, remained upbeat about the market’s outlook. In an interview with Bloomberg Television, Liu noted, “We still see the second half of the year as having plenty of upside potential. While others are calling for a sharp market correction, we see strong underlying fundamentals supporting continued growth.”

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On Wall Street, bullish momentum fueled stock indices to new highs as the second quarter wrapped up, driven by investor optimism that the U.S. is moving closer to formal trade agreements with key partners. Expectations that the Federal Reserve will resume cutting interest rates also boosted confidence, helping Treasuries deliver their best first-half return in five years.

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Still, some uncertainty remains. Trump’s evolving tariff strategy and his administration’s fiscal plans are casting a shadow over the U.S. economic outlook. The dollar reflected those concerns, suffering a 10.8% decline in the first six months of the year — its worst first-half performance since 1973.

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A key source of concern is the president’s $3.3 trillion tax-and-spending package, currently being debated in the Senate, which has reignited fears over ballooning fiscal deficits.

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In Japan, equities dropped by as much as 1.2% as investors reacted to Trump’s renewed tariff threats against the country. The Japanese yen strengthened in response, which tends to negatively impact exporters by making their goods more expensive abroad.

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“Trump seems to be returning to his well-known tactic of escalating tensions only to back down later, just as he did with China in the past,” said Hebe Chen, a market analyst at Vantage Markets in Melbourne. “With the July 9 trade deadline approaching, we can expect more rhetoric and posturing.”

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On the international front, signs emerged that the European Union is willing to negotiate with the U.S. on trade. The EU is reportedly open to a deal that would include a standard 10% tariff on a broad range of its exports to the U.S. However, EU negotiators are pushing for reduced tariffs on critical sectors such as pharmaceuticals, alcohol, semiconductors, and commercial aircraft.

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The willingness of the EU to reach some form of agreement shows a potential path forward for easing global trade tensions — a key concern for markets that have been buffeted by uncertainty over cross-border tariffs and regulatory shifts.

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Despite the mixed signals coming from political leaders, many investors remain focused on macroeconomic trends and corporate performance. Solid earnings, relatively stable economic data, and the likelihood of further policy support from central banks continue to drive sentiment.

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The expectation that the Federal Reserve will resume rate cuts in the second half of the year is seen as a major tailwind, especially as inflation shows signs of cooling and economic indicators point to a soft landing rather than a sharp slowdown. This view has helped power both equity and bond markets to impressive gains so far in 2025.

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As the new quarter begins, the market’s trajectory will likely hinge on key economic releases, trade negotiations, and updates on fiscal policy. Investors will also be paying close attention to earnings season, looking for signs that corporate America can continue to grow in the face of global headwinds.

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In sum, markets appear to be entering the second half of the year with cautious optimism. While political and fiscal uncertainties persist, particularly around Trump’s tariff agenda and spending plans, investors are largely betting that the underlying strength of the U.S. economy and favorable monetary policy will keep the bull market intact — at least for now.

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