From sky-high tariffs to bunker-busting bombs, the second quarter of 2025 built a new wall of worries. By the book, investors should have adopted a risk-off stance. Yet global equities moved towards record highs while the dollar tumbled to its lowest level in three years, another reminder that trading on headlines is rarely a profitable strategy.

Recent policy developments in the United States, particularly those related to inflation and long-term debt sustainability, have brought significant implications for global fixed income markets. With the fiscal outlook becoming increasingly strained, it is an interesting moment to assess how markets are reacting and how investors should position themselves in the current environment.

While stressful, equity volatility and intra‑year pullbacks are surprisingly common. Since 1980, the S&P 500 has averaged an intra‑year decline of around 14 %, with individual drawdowns reaching up to 40 %. This helps put the recent market disturbance into perspective.