Positive moment for equity markets: the peak of tariff uncertainty is now behind us

The weak points at the US level are manufacturing and the real estate market. A new position has been opened in Meta Platforms and the one in Home Depot has been sold.

by Filippo Garbarino, manager of the Lemanik Global Equity Opportunities fund at Lemanik

The current environment appears moderately positive for equity markets. Indeed, the peak of uncertainty over tariffs now seems to be behind us, and the flow of news on tariffs should improve in the coming weeks, during which trade agreements will be signed with some of the main trading partners, significantly reducing the current blended tariff rate.

In May, global equity markets staged a rebound, supported by the de-escalation of the tariff war between the United States and China. Tariffs generally increase inflation and reduce real economic growth. Although the US economy is slowing, we do not expect a technical recession in the short term. Recent corporate earnings releases and updated forecasts for 2025 have been encouraging. Credit card data show remarkable resilience in consumer spending since the start of the year, including April and May, and the recent correction in oil prices is positive for retail sales. Moreover, capital expenditure plans for 2025 have not been significantly cut by US companies, a sign of strong confidence in their business performance and the economy.

However, there are two weak spots: the manufacturing sector, with the ISM index still in restrictive territory; and the real estate market, which remains stagnant because of high mortgage rates. Therefore, during the month a new position was opened in Meta Platforms and the one in Home Depot was sold. At sector level, the portfolio has no exposure to banks, insurance companies or oil companies. The portfolio is overweight in industrials, chemicals and consumer discretionary. Technology is underweight, with no exposure to hardware. There is also no exposure to utilities, real estate and consumer staples, while healthcare is slightly underweight.