1. The United States and Israel launched joint military strikes against Iran over the weekend. Limited market reactions at this stage. We upgrade Oil to Neutral from Negative with a short-term target of USD 80 for Brent. However, we keep our mid-term (12-month) target range of USD 60–70 given underlying overcapacity.
2. Supreme Court rules US tariffs illegal: as expected, Trump’s executive order tariffs were struck down. In response, Trump is resorting to other legislation including Section 122 and 232 to reimpose trade tariffs on a global and sector basis. A new 10% global tariff has been implemented, which may rise to 15%.
3. Blue Owl reignites US private credit fears: private credit manager Blue Owl has closed its ODBC II fund to redemptions and has begun selling assets to return investor capital. US direct lending concerns have increased as US private credit exposure to the software sector may be as high as 20%. Thus far, little spillover to other markets, but we watch for signs of contagion.
4. The HALO (Heavy Assets, Low Obsolescence) effect: the prevailing theme in the stock market at present is the rotation away from digital assets back towards physical assets. Investors have begun to favour companies and industries where the risk of AI disruption is low to none. Positive on Mining, Building & Construction.
5. Expecting 1 Fed rate cut in September: US core inflation remains well above 2%, while non-farm payroll trends have been stronger than expected of late. Emerging optimism over US growth and improved CEO confidence suggest that the Fed will cut only modestly. We expect 1 further Fed rate cut this year, giving a terminal rate of 3.5%.
Edmund Shing
Chief Investment Officer
