A Moment of Calm After the Storm

Economic signals were mixed, but not worrying. Inflation inched up slightly in May, but forward-looking measures indicate that consumers expect price increases to cool over time. That’s good news for both markets and policymakers. Business activity slowed marginally, largely due to lingering tariff pressures, but there were bright spots. Manufacturing rebounded for the first time since February, and new orders for capital goods surged, indicating that firms remain optimistic.

The housing market, however, remains stuck in a holding pattern. While existing home sales ticked higher, new home sales slipped again. High mortgage rates continue to weigh on demand, and the sector is likely to take longer to recover. Still, this is not unusual. Housing tends to react with a delay to interest rate changes and broader economic shifts.   

Yields fell across the bond market this week as investors increasingly priced in the possibility of a Federal Reserve rate cut later this year. The Bloomberg U.S. Aggregate Bond Index posted gains, supported by a combination of softer economic data and more dovish language from Fed officials.

This has improved sentiment in fixed income markets and given long-term investors cause for optimism. While bonds may lack the volatility—or thrill—of equities, they offer something equally valuable: stability and a reliable income stream. That becomes especially attractive during periods of economic uncertainty.

The positive performance of bonds this week underscores the value of diversification in portfolio construction. Equities tend to drive returns during bullish periods, but bonds can provide meaningful downside protection when markets get choppy.  Especially with interest rates as high as they currently are.

In a week where sentiment was more cautious, fixed income—particularly short-dated bonds—helped lift overall portfolio returns and provided a useful counterbalance to risk assets.

Short-dated bonds, in particular, have a practical role to play beyond just portfolio performance. With their lower sensitivity to interest rate changes and typically shorter maturities, they are well-suited for investors who want to prepare for near-term cash needs without leaving money idle.

Whether it's funding an upcoming purchase, covering expenses in early retirement, or simply holding a cash buffer, these instruments can provide liquidity while still generating a yield—something traditional cash accounts often struggle to do effectively.

Europe: Signs of Stabilisation

European markets showed modest strength. The STOXX Europe 600 gained 1.32%, buoyed by improving sentiment in Germany and hopes of increased fiscal support. The DAX surged nearly 3%, even as inflation in France and Spain came in a touch higher than expected. Overall, growth remains subdued but steady.

In the UK, the Bank of England struck a cautious note. Governor Andrew Bailey signaled that rate cuts are on the horizon, but they will be implemented slowly and carefully. This measured approach is designed to support the recovery without reigniting inflation.  As we know, inflation has been extremely damaging for markets, so it is positive to see the UK taking a cautious approach on this.

Japan: Encouraging Gains

In Asia, Japan had a standout week. The Nikkei 225 rose 4.55%, helped by growing global optimism and continued caution from the Bank of Japan. Inflation remains slightly above target, but is trending lower. The central bank is in no rush to raise rates, which gives both equities and bonds room to perform.

China: Trade Progress Reassures Investors

China also saw a boost, thanks to a newly signed trade agreement with the United States. The CSI 300 and Shanghai Composite each rose around 2%, while the Hang Seng rallied over 3%. The deal doesn’t solve every issue, but it marks a significant step forward. The People’s Bank of China reiterated its commitment to supporting growth and managing inflation—a stance that markets welcomed.

Looking at the bigger picture, this week’s developments underscore a vital lesson for investors: discipline wins.

If you had panicked at last weekend’s headlines, or moved to cash at the start of the year, you would have missed out on this recovery. That’s why we keep saying that volatility is the price of admission for long-term investing.

The path to financial growth is rarely smooth. But time and again, history shows that staying diversified, staying invested, and staying patient leads to better outcomes. Whether you’re focused on retirement, building wealth, or preserving capital, it’s the steady, disciplined approach that wins.

This is where portfolio structure matters most. A mix of equities, bonds, alternatives, and global exposure means you’re not reliant on one market or one economic cycle. It also means your portfolio can adapt—whether the news is good or bad.

The recent market highs serve as proof: those who remained patient and trusted the process are now benefiting from the recovery. For others, it’s not too late. Markets don’t move in straight lines, but even amid uncertainty, new opportunities emerge.

After a shaky start to the year markets now seem to be regaining confidence. Stocks hitting all-time highs is not just a headline—it’s a testament to long-term investing.  Whilst it is important to celebrate the high, we need to be mindful that markets will likely pull back at some point and also go on from the current high we are experiencing too. 

Those who stayed the course despite the noise are now seeing the results.

It’s a good time to remind ourselves:

• Markets will always fluctuate in the short term, but long-term discipline wins.
• Staying invested, diversified, and aligned with your goals continues to be the smartest strategy.

As always, if recent headlines have you feeling uncertain or you want to review your portfolio’s alignment with your long-term goals, don’t hesitate to reach out. Our client services team is here to support you every step of the way - they can be reacched by email at client.services@hoxtonwealth.com or on whatsapp through our new global client services WhatsApp number: +44 7384 100200

Until next week - stay the course, stay diversified, and stay confident in your plan.