The first half of 2025 was marked by sharp swings, political drama, and geopolitical shocks for market participants.  

Markets started the year with positive momentum around President Trump’s return, tax cuts, and deregulation but momentum quickly faded after April’s “Liberation Day” selloff, driven by Trump’s tariffs threats, fiscal concerns, Fed tensions, and policy unpredictability.  

Geopolitical risks escalated with a direct Israel-Iran conflict, though a swift ceasefire helped restore market calm. Sentiment improved following a surprise US-China trade truce and a framework deal with the UK, with more trade agreements reportedly in the works.  

Equities rebounded, safe-haven assets surged, and the US dollar weakened in line with Trump’s export-focused strategy.  

From Wall Street to Asia’s tech-driven markets, investors largely looked past early-year turbulence, with risk appetite recovering sharply by mid-year.  

As we head into what promises to be an eventful second half of 2025, let’s take a closer look at how major stock indices performed in H1 2025, and what key themes and risks could shape the months ahead. 

Key Points 

• Global markets started strong in 2025 but quickly turned volatile due to trade tensions, geopolitical risks, and shifting central bank signals. 
• Tech, gold, and select Asian equities led gains, while the US dollar weakened as traders favoured safer or policy-stable assets. 
• As H2 unfolds, markets remain sensitive to rate decisions, earnings results, and potential tariff escalations under Trump’s trade strategy. 

Stock Market Performance ^[1,2,3,4,5] 

Index	Country	Index (27 June 2025)	% YTD Total Return
US
Dow Jones Industrial Average	US	43,819.27	3.89
NASDAQ 100 Index	US	22,534.20	7.65
S&P 500 Index	US	6,173.07	5.64
Europe
Euro Stoxx 50	Europe	563.40	14.47
DAX	Germany	24,033.22	20.71
FTSE 100	UK	8,798.91	9.93
CAC 40	France	7,691.55	7.17
Asia
Nikkei 225	Japan	40,150.79	1.73
Hang Seng	Hong Kong	24,284.15	23.89
CSI 300	China	3,921.76	0.91
KOSPI	South Korea	3,055.94	28.96
MSCI Singapore	Singapore	409.56	12.29
SET	Thailand	1,082.42	20.41
Jakarta Composite Index	Indonesia	6,897.40	0.49
FBM KLCI	Malaysia	1,528.16	4.94

In the US, equity markets held strong despite political and fiscal concerns. The S&P 500 climbed 5.64% YTD, hitting a record high on June 27, while the Nasdaq 100 outperformed with a 7.65% gain, fuelled by AI enthusiasm and Nvidia’s historic rise.   

The Dow Jones rose 3.89%, trailing behind as value stocks lagged tech. In Europe, Germany’s DAX led with a 20.71% YTD surge, boosted by industrial strength and exports. The Euro Stoxx 50 gained 14.47%, supported by trade optimism and an ECB rate pause. The UK’s FTSE 100 rose 9.93%, driven by energy and financials, while France’s CAC 40 added 7.17%. 

Asia saw standout gains from South Korea’s KOSPI (+28.96%) and Hong Kong’s Hang Seng (+23.89%), thanks to chip rallies and improved China sentiment. Singapore’s MSCI Index rose 12.29% on REIT and bank strength, and Indonesia gained 20.4% on solid consumption.  

Meanwhile, Japan’s Nikkei 225 rose just 1.73% amid yen volatility, Thailand’s SET fell 8.0% due to political uncertainty, and Malaysia’s FBM KLCI declined 4.9% YTD as the country navigates structural reforms. 

Commodities: Gold, Oil, and Key Industrial Metals ^[6,7] 

Gold was among the top-performing commodities in H1 2025, surging by close to 25% YTD to trade above $3,300 per ounce. Gold saw increased inflows as a hedge against geopolitical risks, from the Israel–Iran conflict to uncertainty in Ukraine, and a weakening US dollar.  

Safe-haven demand was further amplified by central bank buying and renewed interest from gold ETFs. Oil prices were more volatile. After spiking during the Middle East tensions in Q2 2025, both Brent and WTI pulled back to the US$66-67 per barrel range by late June.  

A quick ceasefire between Israel and Iran, along with signs of increasing OPEC+ supply, helped ease supply fears. But concerns remain: a 2.1 million barrels per day surplus could weigh on prices in the second half of the year if demand remains lackluster.  

As for industrial metals, performance was mixed. Copper demand began to stabilise, especially with signs of Chinese infrastructure support, while lithium and nickel came under pressure due to oversupply and recalibrated EV demand forecasts.  

Related Article: Fueling the Fire: What’s Driving Oil Markets and What Investors Should Know? 

Currencies: USD, EUR, JPY, GBP — Winners and Losers ^[8] 

Currency markets in H1 2025 saw a clear shift away from the US dollar, which weakened amid rising fiscal deficits, policy uncertainty, and reduced safe-haven appeal. This aligned with Trump’s push to boost export competitiveness through a softer dollar.  

The Swiss franc led gains, up 13.7%, followed closely by the euro (+13.4%) and British pound (+9.7%). The Japanese yen also rose 9.2% YTD, though it has shown recent weakness as the Bank of Japan signaled potential delays in policy tightening. These moves reflect growing investor preference for currencies backed by policy stability and safe-haven credibility. 

According to J.P. Morgan Research, Analysts suggest this trend could potentially continue, though uncertainty remains. The firm maintains a bearish view on the US dollar, driven by expectations of slowing domestic growth, reduced appetite for US assets, and a higher likelihood of longer-term dollar depreciation.  

Analysts also highlighted that once a dollar downturn begins, it often lasts — suggesting potential for continued strength in emerging markets currencies and other forex alternatives, subject to market conditions. 

J.P. Morgan also points to expensive dollar valuations and the build-up of US international liabilities as structural factors weighing on the greenback. With other regions adopting more growth-supportive policies and investor interest shifting toward diversified exposures, Analysts note increasing factors that may weigh on the dollar’s relative strength.  

This backdrop has, so far, aligned with gains in both developed and emerging market currencies through the rest of 2025, Currencies of economies with stronger external balances and more defined policy paths saw relative strength.  

Related Article: Top 10 Currencies Affected by Trump’s Tariff Policies 

Central Bank Moves and Interest Rate Trends 

Monetary policy remained a key driver of market sentiment in H1 2025, with central banks taking diverging paths in response to inflation dynamics, political pressure, and shifting growth forecasts. These policy shifts not only influenced rate expectations but also shaped investor behaviour across currencies and asset classes. 

Where Do Rates Stand Now? 

In the US, the Federal Reserve held rates steady throughout the first half of 2025, resisting pressure from President Trump to cut.  

Meanwhile, the European Central Bank (ECB) cut rates for the eighth time, lowering the deposit rate to 2%, as President Lagarde signaled the ECB is nearing the end of its easing cycle amid cooling inflation and rising trade uncertainty from US tariffs.  

Over in Japan, the Bank of Japan (BoJ) held its policy rate steady at 0.5%, extending its pause for a third straight meeting, while Governor Ueda signaled a cautious but slightly hawkish stance, citing inflation pressures and the need to monitor trade and market risks. 

Related Article: Higher for Longer What the Fed’s Cautious Stance Means for Markets in 2025 and Beyond 

The Inflation Battle: Progress or Setbacks? 

Inflation is trending lower across most major economies, though progress has been uneven. In the US, headline inflation has cooled, but core inflation remains sticky, keeping the Fed on alert. The Eurozone has seen faster disinflation, but at the cost of growth.  

In Japan, inflation has stayed above 2% for over three years, which could finally force the BOJ to tighten its ultra-loose stance. Emerging markets, by contrast, have enjoyed relatively stable inflation thanks to stronger reserves and better fiscal positioning.  

However, the full impact of new trade tariffs has yet to be fully reflected in consumer prices and if tariff effects prove more severe, they could rekindle inflationary pressures globally in the second half of the year. 

How Policy Divergence Shaped Currency Markets 

The divergence in global central bank policies had a direct impact on currency markets. The yen’s weakness drew global attention, as the Bank of Japan remained one of the last major central banks to raise rates, lagging significantly behind the US during its aggressive tightening cycle.  

This slow response contributed to the yen plunging to multi-decade lows against the dollar last year, prompting a rare intervention by Japanese authorities to stabilize the currency. While the BOJ has since raised rates modestly, it has refrained from further tightening or major intervention in 2025. 

Meanwhile, Trump’s trade agenda, aimed at reviving US manufacturing through a weaker dollar, has reinforced dollar softness.  

According to market expectations, the Fed may consider up to two rate cuts in H2 2025, which could contribute to further downside pressure on the US dollar—depending on inflation and economic data. That’s especially the case if inflation continues to ease and global growth stabilises.  

Trump’s trade strategy appears to favor a weaker dollar, which added further downward pressure on US currency in the first half of the year. 

Related Article: USD/JPY Analysis: Will Japan’s Inflation and BOJ Policy Be Enough to Anchor the Yen? 

Macro Themes Shaping the First Half of 2025 

The first half of 2025 was shaped by a mix of economic crosswinds and geopolitical headlines that added layers of uncertainty to the global outlook. From inflation dynamics to renewed trade frictions and geopolitical flashpoints, markets were driven as much by sentiment as by fundamentals. 

1. Inflation vs. Growth: A Delicate Balance 

The H1 2025 period highlighted the increasingly complex challenge of balancing disinflation with sustainable growth. While inflation eased across major economies, the path was uneven.  

In the US, sticky core inflation kept the Federal Reserve cautious, even as headline numbers moderated. Europe saw faster disinflation but at the expense of growth momentum, forcing the ECB to cut rates aggressively.  

Japan remained an outlier, with inflation consistently above 2%, a sharp contrast to its historically deflationary environment. For policymakers, the key risk heading into H2 2025 is whether softening prices can coexist with a healthy recovery, or if growth sacrifices have gone too far. 

2. Trade Tensions and Tariff Headlines 

Trade policy returned to center stage in 2025, driven by President Trump’s push for renegotiated agreements and threats of steep tariffs. While a US-China truce and deals with the UK and others brought short-term relief, uncertainty lingers.  

Key sectors such as autos, semiconductors, and energy remain exposed to abrupt policy shifts. The July 9 tariff deadline looms large, with the potential for 50% levies on EU goods if negotiations stall.  

This unpredictability has kept traders on edge, weighing the potential inflationary impact of tariffs against hopes for strategic de-escalation. 

Related Article: What’s at Stake as Trump’s Global Tariffs Deadline Looms? 

3. Geopolitical Events and Their Market Impact 

Geopolitical flashpoints played a major role in shaping market sentiment. The first-ever direct confrontation between Israel and Iran, followed by a rapid US military response and ceasefire, sent oil prices surging, only to reverse course on news of a truce.  

Meanwhile, Russia’s ongoing war in Ukraine and uncertainty around NATO commitments kept global risk premiums elevated. The geopolitical landscape served as a recurring trigger for volatility, reinforcing investor demand for hedges like gold, defensive stocks, and dollar alternatives. 

Key Sector Highlights: Where Traders Found Momentum 

Amid broader macro uncertainty, sector-specific trends drove sharp moves that drew significant trading volume during H1 2025. From tech’s rebound to rate-sensitive financials and volatile commodity markets, the first half of 2025 saw strong performance in areas aligned with macro themes and near-term drivers. 

1. Tech Stocks: Recovery or Reset? 

Tech stocks delivered a mixed but resilient performance in H1 2025. The AI trade regained traction after the sell-off post-Liberation Day, led by Nvidia’s historic ascent to the world’s most valuable company. Semiconductors, cloud infrastructure, and select software names outperformed, particularly in the US and South Korea.  

However, elevated valuations and regulatory overhangs, especially around data, privacy, and antitrust, tempered enthusiasm. Market views diverged between those seeing a reset and those anticipating longer-term AI-driven growth. 

2. Banking and Financials Under Rate Pressures 

Banking stocks struggled to gain consistent footing amid shifting interest rate expectations. US banks faced margin compression in the event of a rate cut in the second half. In Europe, financials could be vulnerable to trade-related shocks.  

Asia’s financial sector, particularly in Singapore and Hong Kong, showed more resilience, supported by capital inflows and stable balance sheets. Markets saw increased flows into dividend-paying stocks and insurers, reflecting a cautious sentiment amid rate uncertainty. 

3. Commodities and Energy: Volatility Opportunities 

Commodities remained one of the most dynamic asset classes in H1. Gold surged above US$3,300/oz, driven by geopolitical risk and safe-haven demand. Oil saw sharp swings, rising on Middle East tensions, then falling as ceasefires and OPEC+ supply adjustments calmed markets.  

Industrial metals like copper and lithium showed mixed results, reflecting uncertainty in China’s recovery and EV demand recalibration. While the commodity space remained highly volatile, this led to elevated short-term trading volumes—though uncertainty remains high, fundamentals remain clouded heading into H2 and could play a more pivotal role. 

Mid-Year Outlook: What Traders Should Monitor in H2 2025 

As markets move into the second half of 2025, attention shifts to forward-looking indicators and key inflection points. From central bank decisions to earnings momentum and external shocks, traders face a landscape where timely data and policy clarity will be closely monitored by market participants assessing potential volatility. 

Central Bank Guidance and Policy Shifts 

Policy remains the primary driver of macro narratives in the second half. According to market expectations, The Federal Reserve may begin cutting rates as early as September, though this is contingent on further inflation moderation.  

The ECB appears close to ending its easing cycle, while the Bank of Japan remains in a wait-and-see mode, eyeing wage trends and trade spillovers. Divergence in policy paths will continue to shape currency dynamics and capital flows—particularly in emerging markets. 

Earnings Season Trends 

With the Q2 2025 earnings season underway, investors will be watching whether corporate profits can justify elevated equity valuations. In the US, expectations are modest as analysts project the slowest earnings growth in two years for the S&P 500.  

In Asia, strong showings from tech exporters are expected, especially in South Korea and Taiwan. Europe faces margin pressure from weak demand and lingering tariff concerns. Earnings quality, guidance revisions, and AI-linked monetisation will be key focus areas. 

Potential Risks and Tailwinds for Markets 

Risks heading into H2 2025 include renewed geopolitical tensions, potential tariff escalations, and weaker-than-expected corporate earnings. On the macro front, a resurgence in inflation or labor market softening could delay anticipated rate cuts.  

That said, tailwinds like improving trade dynamics, strong consumer demand, looser financial conditions, and sustained AI investment offer support. A key upside catalyst could be greater clarity on Trump’s tariff strategy, whether a delay beyond the July 9 deadline or a broad 10% levy, giving markets a chance to assess the true economic and earnings impact.  

Until then, expect markets to remain news-driven and reactive.  

Related Article: News Trading: A Deep Dive into ‘Buy the Rumour, Sell the News’ 

A Dynamic First Half — What Comes Next? 

The first half of 2025 reminded market participants that even in a high-volatility environment, price resilience can still occur despite elevated uncertainty.  

From geopolitical shocks and tariff threats to inflation moderation and AI optimism, the narrative was far from linear. As we enter the second half of 2025, the key will be close monitoring of macroeconomic and geopolitical developments. Central bank cues, earnings surprises, and geopolitical developments will all play a role in shaping outcomes.  

For traders and market participants alike, staying informed and nimble will be crucial in navigating what promises to be an equally eventful second half of the year. 

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