Snowballing Away
- 23 June 2025 (7 min read)
KEY POINTS
The crisis in the Middle East has escalated further, with the direct involvement of the US. In the short run, the market reaction will be driven by the magnitude of Tehran’s response. There is no palatable option for massive retaliation, and a rational calculation, on balance, would conclude to a limited reaction by Iran. Yet, the odds for the medium to long-term scenarios are much more widely distributed. Following Ilan Goldenberg’s analysis in Foreign Affairs, Tehran can consider that the cost/benefit balance of the nuclear programme has changed and that it is time for a policy re-set entailing full cooperation with international institutions and détente with Israel and the US. In his pessimistic scenario though, the hardliners would win the argument and calculate that continuing the programme is the best chance of preserving the regime. This would likely force a lasting involvement of the US, i.e. a further break from D. Trump’s isolationist preferences.
The first indications from the market on Sunday night pointed to some moderate strengthening of the dollar. We will want to see beyond the “knee-jerk” reaction and see if the pattern from last week – when US assets did not benefit from the usual “flight to safe haven” behaviour – holds. This could partly be the result of the market concerns about the US overall policy stance. The Senate has moderated the House’s plans on some aspects – crucially on Section 899 – but it is far from clear at this stage if the final bill will differ much from the initial version in terms of fiscal sustainability.
Crossing the Atlantic, we explore Swiss monetary policy. A key point there, in our view, is that the resilience of exports to currency appreciation – a key Swiss asset – cannot justify benign neglect on FX issues, since even strong economies cannot shrug off deflation. The Euro area cannot even necessarily count on such export resilience. Actually, “real time data” based on seaports activity points to weak exports in Q2 already.
Disclaimer
This website is published by AXA Investment Managers Asia Limited (“AXA IM HK”), an entity licensed by the Securities and Futures Commission of Hong Kong (“SFC”), for general circulation and informational purposes only. It does not constitute investment research or financial analysis relating to transactions in financial instruments, nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy, sell or enter into any transactions in respect of any investments, products or services, and should not be considered as solicitation or investment, legal, tax or any other advice, a recommendation for an investment strategy or a personalised recommendation to buy or sell securities under any applicable law or regulation. It has been prepared without taking into account the specific personal circumstances, investment objectives, financial situation, investment knowledge or particular needs of any particular person and may be subject to change at any time without notice. Offering may be made only on the basis of the information disclosed in the relevant offering documents. Please consult independent financial or other professional advisers if you are unsure about any information contained herein.
Due to its simplification, this publication is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee such opinions, estimates and forecasts made will come to pass. Actual results of operations and achievements may differ materially. Data, figures, declarations, analysis, predictions and other information in this publication is provided based on our state of knowledge at the time of creation of this publication. Information herein may be obtained from sources believed to be reliable. AXA IM HK has reasonable belief that such information is accurate, complete and up-to-date. To the maximum extent permitted by law, AXA IM HK, its affiliates, directors, officers or employees take no responsibility for the data provided by third party, including the accuracy of such data. This material does not contain sufficient information to support an investment decision. References to companies (if any) are for illustrative purposes only and should not be viewed as investment recommendations or solicitations.
All investment involves risk, including the loss of capital. The value of investments and the income from them can fluctuate and that past performance is no guarantee of future returns, investors may not get back the amount originally invested. Investors should not make any investment decision based on this material alone.
Some of the services listed on this Website may not be available for offer to retail investors.
This Website has not been reviewed by the SFC. © 2025 AXA Investment Managers. All rights reserved.