Robert Lind, Economist at Capital Group said: “The full impact of recent trade agreements has yet to materialise, leaving policymakers to navigate a delicate balance between slowing growth and the risk of persistent inflation. While the Federal Reserve has adopted a neutral stance for now, we are relatively constructive on the outlook for global growth. That said, we’re beginning to see early signs of softness in the US economy. The impact of tariffs is likely to push inflation higher while slowing growth, which will put more pressure on the Fed. A modest policy easing later this year appears plausible, but the Fed’s flexibility could be limited if inflation proves more stubborn than expected. In Europe, central banks are also expected to ease policy slightly to offset the effects of tariffs and currency strength against the dollar. Meanwhile, Japan is likely to continue its gradual tightening path. Overall, the global policy environment remains mixed, and investors should stay alert to how central banks’ balance inflation risks with the need to support growth.”

John Lamb, Equity Investment Director at Capital Group, said: “Equity market leadership so far this year has begun to expand beyond US and tech-orientated companies, but the key question is whether this will continue. In this uncertain environment, we believe investors should avoid positioning for binary outcomes and instead focus on building resilient portfolios that can perform across different cycles, regions and styles. Flexibility and diversification are key to navigating what could be a more volatile and structurally different market landscape. Companies with a global reach, diversified revenue streams and flexible supply chains could be best placed to evolve to adapt to shifting global geopolitical and trade dynamics.”

Jeremy Cunningham, Fixed Income Investment Director at Capital Group, said: “Although the Federal Reserve decided to keep rates steady, the chance of rate cuts at upcoming meetings remain live as they balance softening economic data with the potential for persistent inflation. A supportive monetary policy cycle should continue to support higher-quality credit allocations. Aside from a short lived sell off in April post liberation day, credit valuations have remained resilient, supported by powerful technical forces. Elevated liquidity, significant cash on the sidelines and ongoing policy support continue to compress risk premia and dampen volatility. These dynamics can keep spreads still relatively tight despite economic uncertainty. In this environment, thoughtful positioning is essential. Focusing on higher-quality credit can help protect portfolios while still delivering income. With markets prone to sudden shifts, selectivity and flexibility are key. One important takeaway from recent volatility is the value of maintaining a solid defensive allocation to help smooth returns. We believe higher-quality credit is well placed to deliver.”

“Underpinning inherent credit strength is corporate fundamentals and a resilient consumer which remain robust despite trade-related uncertainty. In Investment Grade Corporates, credit metrics are particularly strong by historical standards, with opportunities emerging in areas such as European banks, US electric utilities, and pharmaceuticals. These bonds also provide a source of duration, which can help in case of a continued slowdown of economic growth. Against a backdrop of solid corporate health and a resilient consumer, we believe higher-quality credit can continue to provide the defensive ballast portfolios need.”