What happened in the last month?

In focus: rising inflation fears

According to the latest consumer surveys conducted by the University of Michigan, Americans expect inflation to rise from the current level to an annual rate of 7.3% and to 4.6% over the next five years. These are the highest rates since 1981 and, in the latter case, since 1991.

The sharp rise in expectations, triggered by the imminent introduction of higher tariffs, increases the risk that the Federal Reserve (Fed), which acts as the central bank, will lose control over price stability.  American households are showing signs of increasing financial stress, and this survey also highlights their growing dissatisfaction.

Consumer confidence is plummeting (the University of Michigan Consumer Confidence Index stands at 50.8 points, the second lowest since the historic low in June 2022), shop prices are rising (Walmart recently announced that it has started to raise prices due to tariffs), all of which makes it unlikely that the Fed will cut interest rates in the near future.  The actual tariff imposed on imports to the United States is currently 17.8%, which is more than seven times the level before the trade war. Drastic changes in policy have caused paralysing uncertainty for businesses.

 

 

Equity market news

US stocks rebounded from early losses on Friday, ending a volatile but strong month. The S&P 500 index, which reflects the overall performance of the US equity market, had its best May since 1990 and its best month since November 2023, with a rise of more than 6%, while the Dow stock market index rose by 4% and the Nasdaq, which is also the benchmark index for US technology stocks, rose by nearly 10% thanks to the strengthening of the technology sector. Q1 results were strong, although expectations for Q2 and Q3 were significantly revised downwards. The “Magnificent 7” stocks, i.e. the seven largest technology and growth stocks on the US equity market, achieved more realistic valuations following the significant correction in April, and the earnings per share (EPS) growth gap widened again. Shares in artificial intelligence manufacturer Nvidia rose by nearly 24% in May, making the company the world’s most valuable publicly traded company by market capitalisation at $3,450 billion at the beginning of June. At the same time, the US equity market is highly valued: the average price-to-earnings ratio (P/E) on Wall Street is 22, while that of European companies is barely more than half that. In Central Europe, this multiplier is below 10, given the results of the Polish elections (the presidential election was won by the opposition right wing, which may try to halt the process of Westernisation) and the ongoing war in Ukraine, which poses a serious risk.

Bond market news

Economic indicators point to an uncertain labour market in the US, which means uncertain inflation expectations and an uncertain interest rate path. For one thing, the labour market keeps showing solid monthly data, which could delay the Fed’s interest rate cuts this year because of inflationary pressure. However, other statistics show that the overseas labour market is already cooling down beneath the surface: although the number of job vacancies in the US rose in April, the number of redundancies rose to a level not seen in nine months. Uncertainty surrounding tariffs is slowly but surely undermining the economic outlook. In any case, dollar interest rates remain high (10-year government bonds offer 4.3% per annum). The situation is not much better in Europe, where the European Central Bank (ECB) has cut its base rate to its lowest level since early 2023, to 2%, in response to slowing inflation and the threats to growth in the region posed by President Trump’s trade war. However, market reactions were cautious, with investors divided over the central bank’s next moves. Many believe that the cycle of interest rate cuts is coming to an end. Government spending is expected to accelerate in the future.

The weaker dollar and US macroeconomy, lower oil prices, stable regional currencies and more attractive yield levels remain fairly supportive for Central and Eastern European bonds.

Alternative investments news

Recession is not good for commodity markets. In May, the Bloomberg Commodity Index (BCOM), which tracks average commodity prices, showed mixed performance: the weight of the energy sector decreased, while that of agricultural products increased, particularly in the case of grains and “soft commodities” such as coffee, sugar and cotton. On the oil market, the price of Brent crude oil, North Sea light crude oil, which is the benchmark in Europe, and WTI crude oil, a Texas oil grade, both fell by 6-7% as demand weakened due to the global economic slowdown and US inventories were already high. Escalating geopolitical tensions, such as the Ukrainian drone attacks on Russia, have led to a temporary upturn, but the long-term outlook remains pessimistic, as the OPEC+ oil cartel, which comprises the largest producers, will increase production by 411,000 barrels per day from July. Prices are expected to fall to around $50 per barrel by the end of the year. Even gold has not performed well: the price of the precious metal, which has been seen as a symbol of stable value and a star performer in recent years, has stagnated despite geopolitical tensions. Its rise has stalled due to its over-positioning, albeit at a historic price of $3,400 per ounce.

 

What can we expect in the coming period?

Investment clock

Our forecast model has once again pointed to a recession. According to the Global Investment Clock, the global economic outlook is weak: although inflationary pressures have eased, mainly due to falling global oil prices, the overall picture remains gloomy due to the uncertainty caused by US trade policy.

After “Liberation Day” (2 April, when the first import tariffs were announced), economic uncertainty skyrocketed and tariff news began to dominate the headlines.  The impact of tariffs is already evident in consumer surveys: American consumers are expecting a collapse in the labour market and rising inflation in the coming months. However, actual data did not yet show any significant deterioration. As a result, the US Federal Reserve has decided to wait and see, and investors are expecting fewer interest rate cuts than previously anticipated.

The situation is no better in Europe. The investment cycle of the “old continent” has been in recession for a long time. It is true that the economies of the 20 eurozone countries, which use the common currency, started the year strongly thanks to exports brought forward due to the tariff increase, but the structural weaknesses of the European economy (weak manufacturing industry, war-related challenges) remain.

Lastly, the Chinese investment clock is also showing signs of a recession: tariffs are reducing international demand for Chinese goods, while Beijing is encouraging exporters to sell their products on the domestic market in order to keep factories running, which is causing a huge oversupply that could lead to a spiral of deflation.

 

The clock indicator denotes the current economic cycle phase. Faded indicators reflect the previous situation.

Tactical Asset Allocation

For June, we have not changed the asset allocation from the previous month. Based on the Investment Clock, bonds may outperform, while commodities and equities may underperform in the coming months. The reason is that when the economy is in recession, expected central bank interest rate cuts, which stimulate growth through low-interest loans, increase the value of bond investments. True, higher-than-expected inflation, primarily due to tariffs, could have a negative impact on longer-term US bonds and on the dollar itself.

Developed market bonds remain dominant

We are maintaining the increased weighting of risk-free assets (cash, money market instruments) introduced in April. From an investor perspective, the global business environment still calls for caution, as Donald Trump’s economic policy remains unpredictable. Economic cycles in both the United States and Europe favour bond investments: economic prospects are bleak, and if central banks cut interest rates to stimulate growth through cheaper loans, this could boost the value of US and European government bonds, which previously offered higher yields. Thanks to significant real yields, Central European government bonds issued in local currencies may also become more expensive, and some of the huge capital outflows from the US due to growing uncertainty may end up here.

A good opportunity for risk takers – Central European equities

Unlike the US, European and Central European equity markets (especially the highly represented banking sector) are now performing better, with continental equity markets offering significant opportunities in terms of pricing and earnings growth potential. While, for example, the average P/E ratio (which shows how many times a company’s shares are traded based on its profits) on overseas stock exchanges was 22, the similar ratio for the eurozone was just under 15 in the first few days of June. Our immediate region is rated even higher, with a multiplier of less than 10. However, this can only happen in an environment where no further customs measures with negative economic impacts are introduced.

The weights indicate the evaluation of the respective country, region, and asset class, providing a basis for portfolio managers in structuring portfolios and establishing positions, thus helping to capitalize on market opportunities.

Weights:

Changes – change compare to the the previous month

The table was prepared based on our investment clock and quadrant modell**.

 

Focus fund: VIG MoneyMaxx Emerging Market Absolute Return Investment Fund

The VIG MoneyMaxx Emerging Market Absolute Return Investment Fund aims to adapt to the rapidly changing global economic environment through flexible asset allocation. This strategy is particularly relevant in June 2025, as the global economy is heading towards recession, while global capital flows are increasingly shifting from the United States to emerging markets. This trend is reinforced by the weakening dollar, subdued growth in developed countries and favourable valuations in emerging regions.

The Fund has a mixed asset structure, meaning that it can dynamically switch between equities and bonds in line with current market opportunities. Its focus on emerging markets offers a stake in economies that are benefiting from global restructuring, whether in Asia, Latin America or Eastern Europe.

The Fund pursues an absolute return strategy: its objective is not to track a specific index, but to achieve positive returns in various market environments. The Fund may be ideal for risk-taking but prudent investors who want to benefit from global growth but also value flexibility and professional asset selection.

Based on our expectations (based on tactical asset allocation), the fund of the month may outperform in the near future.

 

ESG theme of the month:The hidden costs of fossil fuels

The 2021 report of the Intergovernmental Panel on Climate Change (IPCC) and the warning issued by António Guterres, Secretary-General of the United Nations, emphasise that we must urgently stop using fossil fuels in order to protect our planet. In a 2025 study, 11 expert scientists provide scientific evidence that fossil fuels are the main cause of the climate crisis and present fair and scientifically sound solutions that are already available and could be implemented immediately to tackle the problem. In our previous article, we presented the harmful effects of fossil fuels on the environment, public health and biodiversity, as well as their alternatives. This article is available here. We will now continue to explore the negative effects of fossil fuels discussed in the study, this time focusing on three additional effects.

Environmental injustice

Research on environmental justice over the past decades has clearly shown that the environmental burdens associated with fossil fuels and climate change disproportionately affect communities of colour, indigenous peoples and low-income communities. Among US states, for example, Texas has the highest rate of health problems, where people of colour make up more than 60% of the population. [1] There are huge chemical industry corridors in Texas, such as the 85-mile-long ‘Cancer Alley’, which is lined with mainly Black, Latino and Native American communities that have been exposed to harmful health and quality of life impacts from decades of industrial development. [2]  According to a 2012 NAACP study, 76% of people living within three miles of one of the 12 “dirtiest” coal-fired power plants are also people of colour. [3] The study calls such environmental injustices “fossil fuel racism”, which is the result and a major problem of racial discrimination and systemic inequalities.[4]

Petrochemical pollution

Petrochemical products also pose a threat. These products are chemicals produced from fossil fuel materials by using fossil energy sources. More than 75% of this production accounts for plastics and pesticides, making these industries responsible for most of the associated environmental damage. [5] Plastic production, for example, not only costs hundreds of billions of dollars in health and social costs each year, but is also extremely harmful to humans and animals due to the presence of microplastics and toxic compounds in oceans, drinking water, soil, air, food and the human body. Every year, 19-23 million tonnes of plastic enter waterways worldwide, threatening marine life, facilitating the spread of invasive species and pathogens, and threatening terrestrial ecosystems. [6] Similar to the plastics industry, fossil-based agricultural chemicals, including fertilisers and pesticides, also have a significant environmental impact, as a large proportion of fertilisers are not absorbed by plants but end up in the air, soil and water, resulting in acid rain, biodiversity loss and dead zones in water. These impacts also tend to affect disadvantaged groups, thereby contributing to environmental injustice and systemic inequalities. [7]

Disinformation in industry

The fossil fuel industry has been aware since the 1970s that its products contribute significantly to climate change, but instead of sharing this information with the public, it launched a decades-long, multi-billion-dollar campaign to conceal the facts, discredit scientific findings and delay measures to transition to clean, renewable energy. Their strategy was based on emphasising scientific uncertainty, i.e. they sought to cast doubt on the scientific consensus and convince civil society and governments that there was insufficient evidence to take action. They tried to achieve their goal using various means, including misleading advertisements, reports and support for climate sceptics. Since the 2000s, they have shifted from denial to “greenwashing”, making empty promises to reduce emissions and shifting responsibility to consumers. The World Economic Forum agreed that, due to such tactics currently in use, disinformation is now one of the leading global risks. [8]

According to the study, in order to eliminate racism linked to fossil fuels, governments and civil society must acknowledge and remedy past and present injustices. For a just transition, special attention should be paid to protecting the most affected disadvantaged communities, for example by eliminating polluting infrastructure, restoring the environment and improving access to renewable energy sources. In order to reduce petrochemical pollution, it is primarily necessary to significantly reduce plastic production, which could be achieved through legally binding targets at global and national level. In order to reduce the use of fossil-based fertilisers and pesticides in agriculture, it is essential to move away from industrial agriculture towards more sustainable, agroecological methods and integrated pest management strategies. Scientists say that governments and civil society should work together to limit the political and economic influence of the fossil fuel industry, stop the approval of new fossil fuel projects, and gradually phase out the production and use of fossil fuels. Part of the fight against disinformation involves increasing transparency, publishing scientific findings and information about the fossil fuel industry’s activities, and taking legal action against misleading companies. [9]

Overall, the problems and risks associated with fossil fuels indicate that these energy sources are indeed a ticking time bomb threatening both society and the planet. If we do nothing to combat them, our environmental, health and economic vulnerability will continue to grow, while the effects of climate change will worsen and we will leave behind an increasingly unliveable world for future generations.

Sources: [1]-[9]: https://academic.oup.com/oocc/article/5/1/kgaf011/8099165

Disclaimer

This is a distribution announcement. In order to make well-founded investment decisions, please inform yourself thoroughly regarding the Fund’s investment policy, potential investment risks and distribution in the Fund’s key investment information, official prospectus and management regulations available at the Fund’s distribution outlets and on the Fund Manager’s website (www.vigam.hu). Past returns do not predict future performance. The future performance that can be achieved by investing may be subject to tax, and the tax and duty information relating to specific financial instruments and transactions can only be accurately assessed on the basis of the individual circumstances of each investor and may change in the future. It is the responsibility of the investor to inform himself about the tax liability and to make the decision within the limits of the law. The information contained in this leaflet is for informational purposes only and does not constitute an investment recommendation, an offer or investment advice. VIG Asset Management Hungary Closed Company Limited by Shares accepts no liability for any investment decision made on the basis of this information and its consequences.