Investment Strategies

Wealth Managers React After EU And US Reach Trade Deal

Amanda Cheesley Deputy Editor 29 July 2025

Wealth Managers React After EU And US Reach Trade Deal

After the US and the EU clinched an agreement to cap tariffs on most EU exports to the US at 15 per cent, wealth managers discuss the impact for markets and asset allocation.

The general sentiment among wealth managers about the US-EU trade deal is that it could have been a lot worse.

The agreement on tariffs between the European Union and US over the weekend is a development likely to reinforce the market narrative that the worst of the trade conflict has passed, according to Mark Haefele, chief investment officer at UBS Global Wealth Management.

The agreement will cap levies on most EU exports to the US at 15 per cent, half the 30 per cent level that the US administration had threatened to impose if an agreement was not reached prior to a 1 August deadline.

As part of the agreement, US President Donald Trump said the EU has committed to buy $750 billion of US energy and invest $600 billion in the US, in addition to existing investment, and purchase vast amounts of US military equipment. However, questions remain on the feasibility and mechanisms of purchase and investment agreements, as well as on how the 15 per cent rate might interact with potentially higher Section 232 tariffs, such as on pharmaceuticals. The agreement is seen as a short-term positive for both economies and investors. Futures on the STOXX 600 were up 0.9 per cent on Monday morning, while contracts on the S&P 500 rose 0.4 per cent. UBS GWM maintains its base case that the S&P 500 can continue to advance over the next 12 months.

Meanwhile, Michael Browne, global investment strategist at Franklin Templeton Institute, believes that the deal is good news for Europe as it removes any uncertainty which was reflected in the positive market movements Monday morning.

“Like the Japan deal, it seems to involve the US slapping on tariffs while the other side pledges to open up its markets. But for stock markets, the key element is that a deal has been done, and at a lower tariff level than feared," Chris Beauchamp, chief market analyst at UK-headquartered global trading and investing platform IG, added.

“We will now have to see what the tariffs mean for businesses and how they will be absorbed, possibly by margins but it will vary by sectors as it’s almost impossible for German autos, plausible for luxury goods,” Browne continued. 

“If corporates are to raise prices by 15 per cent, how much will the US consumer wear? Does the consumer simply refuse to buy as a result, evidenced by big volume disruption but returning sales later or even next year, or more threateningly the consumer opts for substitution. This is not just buying a US equivalent but the kind of substitution we are seeing in steel where the tariff is now 50 per cent. What can be used instead? This is potentially dangerous territory as it equates to a permanent loss of business.” 

“However, what the 15 per cent tariffs does do is lower the risk of tariff arbitrage, where companies would have moved production to say the UK on 10 per cent from Ireland at 15 per cent. A 5 per cent differential is probably not enough to warrant this, but some undoubtedly will,” Browne continued. 

The US and China have also agreed to extend their tariff truce for another three months, as officials meet in Stockholm this week for their third round of negotiations. “It seems that Trump is not really in Turnberry to play golf! Markets like certainty and we should expect a deal very soon,” Browne said.

Asset allocation
Haefele expects market upside over the coming 12 months, and greater tariff certainty will help support that. At the same time, after a strong rally and with good news now well-priced, Haefele believes that markets may be vulnerable to volatility in the near-term. “Investors who are already allocated to equities in line with their strategic benchmarks should consider implementing short-term hedges and those under-allocated should prepare to add exposure on potential market dips in the weeks ahead,” he said.

Haefele believes that potential volatility could be a good opportunity for investors to build exposure to structural growth ideas, including artificial intelligence, power and resources, and longevity, which he expects to deliver attractive returns in the years ahead. Regarding AI, diversified exposure across infrastructure, semiconductors, and applications should capture accelerating adoption and monetisation. He expects power and resources to continue benefiting from surging electricity demand. Meanwhile, the longevity opportunity is supported by demographic shifts and rapid innovation in healthcare, medtech, and wellness.

Haefele sees an attractive risk-reward profile in quality investment grade bonds. Yields remain relatively high and, in UBS GWM's view, the risk-return for high yield bonds and senior loans looks less appealing at this stage owing to tight spreads. He favours medium duration – five to seven years – given the risk of higher volatility at the long end of the curve.

Haefele also believes that an allocation to gold remains an effective hedge against residual geopolitical and political uncertainty, including potential fears about US Federal Reserve independence. He maintains his $3,500/oz target and does not rule out the potential for prices to exceed this level if risks escalate.

He expects the US dollar to weaken by year-end, given the US’s significant fiscal and current account deficits and an ongoing trend of overseas investors re-evaluating US dollar exposure. While high US interest rates make hedging dollar exposure expensive, Haefele believes that investors should review their currency allocations and align them with those required to meet liabilities or spending plans.

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