Key takeaways
Tariff uncertainty
Until ongoing tariff uncertainty is resolved, countries may be hesitant to strike new trade deals with the US.
Economic resilience.
Despite the noise of the trade war, US financial markets and the economy have shown remarkable resilience.
Global assets
We continue to believe non-US dollar assets are more attractively valued and well-positioned in today’s environment.
Feeling dizzy? You’re not alone. Last week began with a whirlwind: A 50% US tariff on European Union exports was delayed just days after being announced. A few days later, the Court of International Trade declared many of the Trump-era tariffs invalid, including ones announced on “Liberation Day.” Then hours later, a US Federal Appeals Court paused that ruling from the trade court, putting the impacted tariffs back in place until further legal arguments can be made.
Spare a thought for the researchers at the Yale Budget Lab, who are constantly updating the “US effective tariff rate.” Their estimates have swung wildly — from 28% just after Liberation Day to 6.9% following the trade court’s ruling, and now likely back to the mid-teens after the appeal.1
Where trade policy goes from here is anyone’s guess. Many of us have likely been brushing up on Sections 122 and 338 of the US Trade Act. Until the standoff between the Trump administration and Congress is resolved, countries may be hesitant to strike new trade deals with the US. The bottom line: Policy uncertainty is here to stay.
This week’s focus: The US amid uncertainty
Despite the noise, US financial markets and the economy have shown remarkable resilience:
- Markets are back to square one
Inflation expectations and real yields have returned to levels seen at the start of the year.2 Corporate bond spreads have tightened toward early 2025 levels,3 and the S&P 500 Index has posted a modest gain year-to-date4 — reflecting a market that’s been weathering uncertainty without a clear direction, in our view. - A solid Treasury auction
Concerns about the US funding its growing fiscal deficit may have been overblown. Last week’s 5-year Treasury auction saw near-record demand,5 easing fears of rising borrowing costs.
- Consumers are holding steady
While consumer spending softened in April — partly due to a record 20% drop in goods imports from tariffs6 — the labor market has remained strong. Disposable personal income rose for the fourth consecutive month.7 - Inflation remains contained
Tariffs haven’t yet pushed up prices. The Federal Reserve’s preferred inflation gauge, the Personal Consumption Expenditures index, rose just 0.1% month-over-month in April and 2.5% year-over-year — the smallest annual increase in over four years.8 - Positive sign for Big Tech
NVIDIA announced strong first-quarter earnings, underscoring the enduring momentum behind the artificial intelligence theme. While we’re not offering a stock recommendation, it’s a reminder that investment themes can persist — even amid policy distractions.
Looking beyond the US
Our focus on the US this week isn’t to suggest investors ignore global opportunities. On the contrary, we continue to believe non-US dollar assets are more attractively valued and well-positioned in today’s environment. But it’s worth noting that, despite the policy fog, the US economic backdrop has remained relatively sound.
What to watch this week
| Data release | Why it’s important | |
|---|---|---|
| June 2 | US ISM manufacturing | Leading indicator that tends to capture inflection points in the economy |
| June 2 | UK house prices | Details health of UK housing market |
| June 2 | China Purchasing Managers’ Index | Leading indicator that tends to capture inflection points in the economy |
| June 3 | US capital goods orders | Insight into business investment as trade uncertainty hits sentiment |
| June 3 | Europe Consumer Price Index (CPI) | Potential to influence European Central Bank (ECB) policy decisions |
| June 4 | US Job Openings and Labor Turnover Survey (JOLTS) | Detailed look at demand side of labor market |
| June 5 | Europe Producer Price Index (PPI) | Early look at price movements from producers’ perspective |
| June 6 | US nonfarm payrolls | Details health of US job market |
| June 6 | Europe ECB meeting | Insight into direction of European policymaking |
| June 6 | Europe retail sales | Highlights state of European consumer |
—
Originally Posted on June 2, 2025
Despite trade policy uncertainty, US economy has been resilient by Invesco US
Footnotes
- Source: US Department of Trade, Yale Budget Lab, May 30, 2025.
- Source: Bloomberg L.P., May 30, 2025, based on the yield on the 10-year US Treasury Inflation Protected Security (TIPS) and the 10-year US Treasury Inflation Breakeven, which is the difference between the 10-year US Treasury rate and the 10-Year US TIPS rate.
- Source: Bloomberg L.P., May 29, 2025, based on the option-adjusted spread of the Bloomberg US Corporate Bond Index, which began the year at 80 basis points and was at 89 basis points at market close on May 29, 2025.
- Source: Bloomberg L.P., May 29, 2025. The year-to-date price return of the S&P 500 Index at market close on May 29, 2025, was 0.52%.
- Source: Bloomberg L.P., US Treasury Department, May 2025.
- Source: US Bureau of Economic Analysis, April 30, 2025.
- Source: US Bureau of Economic Analysis, April 30, 2025.
- Source: Bloomberg L.P., May 30, 2025, based on the price-to-earnings ratio of the S&P 500 Index and the MSCI All Country World ex USA Index.
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