Economic and Market Overview
In Q2 2025, global economies and financial markets were shaped by a complex mix of macroeconomic forces, including slowing growth, higher or sticky inflation, and shifting monetary policy expectations. While inflation remained high across advanced economies, lingering tariff pressures and geopolitical risks, especially in the Middle East, kept uncertainty elevated. Central banks like the Fed paused rate cuts while the Bank of England delivered only one cut amid mixed signals, further unsettling markets. The U.S. economy showed signs of deceleration, China’s recovery lost momentum, and Europe struggled with weak investment and trade headwinds. Despite these challenges, equity markets rebounded on the back of strong tech earnings and hopes for future stimulus, while bond yields eased as investors priced in slower global growth. Investors’ appetite for risk assets improved as both equities and Bitcoin delivered strong performances in the second quarter.
Looking at the performance of major asset classes in Q2 2025 (April 1 – June 30), global financial markets rallied strongly across most asset classes, reversing Q1’s COVID-style crash provoked by tariffs escalation. U.S. equities surged with the S&P 500 climbing about +10.5% while DJ Islamic Markets Index surged 11.1%, propelled by resumed tariffs’ talks, resilient corporate earnings, and strong AI sector performance. International equities also outperformed, Japanese Nikkei 225 index rose roughly +13.7% and China’s Shanghai delivered +2.9%. European stocks ended the quarter flat while UK FTSE 100 rose 2.57% (European stocks delivered over 10% in USD terms all supported by a weakening dollar). GBP appreciated 6.26% against USD. Fixed-income markets were positive too, where DJ Sukuk Index returned 1.64% as yields drifted lower following easing inflation data and central bank restraint. In contrast, broad commodities underperformed, dipping about 2.62%, weighed down by falling oil prices (down 10.5%) despite mid-June geopolitical tensions. Finally, gold and crypto-linked sectors outperformed traditional commodities, driven by safe-haven demand and strong crypto legislation momentum and broadening adoption of digital assets.
Performance of Global Assets Q2 2025
Portfolio Commentary
During the second quarter, Balanced, Balanced Growth, Growth, Progressive Growth portfolios performed positively as markets recovered from a drop in Q1 due to tariffs announcements. Progressive Growth portfolio appreciated the most, with a 3.7% rise in value during the period. The lower risk portfolios, namely, Defensive, Conservative and Cautious portfolios depreciated in value primarily impacted by greater rise in GBP/USD (6.26%) than the rise in sukuk values in Q2.
Performance of Simply Ethical Online Portfolios in Q1 (01 April 2025 – 30 June 2025)
Year to Date Performance of Simply Ethical Online Portfolios (01 January 2025 – 30 June 2025)
During the quarter, a number of changes were made to the investment allocation for all portfolios. In general, the allocation for equities and precious metals was raised whilst sukuk allocation was reduced. Given our cautious view on equities, we had maintained relatively lower allocation than the broader market, however, with the recent market correction equities allocation was raised. A new fund, namely, Franklin Shariah Technology Fund was added to a number of portfolios. As noted in our previous quarterly update, there are challenges for the fixed income market due to monetary policy uncertainties and rising government debt levels particularly in the US amongst other factors that prompted us to reduce sukuk allocation whilst raising precious metals allocation to manage certain market risks but also reflecting our bullish long-term view on this asset class. We maintain diversification across different asset classes (equities, sukuks and commodities) and regions/markets for all portfolios. We continue to maintain a cautious view on investments, as current market valuation may be difficult to maintain given challenging macroeconomic environment ahead and heightened political uncertainties – both remain a possible risk to the markets.
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Disclaimer
This article is for information only. Please do not act based on anything you might read in this article. Past performance is not a reliable indicator of current or future returns. This article contains general information only and does not consider individual objectives, taxation position or financial needs. Nor does this constitute a recommendation of the suitability of any investment strategy for a particular investor. It is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or instrument or to participate in any trading strategy to any person in any jurisdiction in which such an offer or solicitation is not authorised or to any person to whom it would be unlawful to market such an offer or solicitation.
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