August – Everything just got a bit more expensive
August 1st came, and while us common folks may not have felt anything, many US industries and pretty soon the consumer, will feel a pinch. This is also true for foreign companies exporting to the US as most are not able to pass on 100% of the tariffs’ cost. More on this in the chart of the month.
If you thought that we can now finally turn the page on this saga, you are wrong. There remains a lot of uncertainty on which goods might or might not be exempt, what the final tariff will be on countries that got a last-minute extension (Mexico, China). Some countries had their fate already sealed, with the most significant levies hitting Brazil (50%), Canada (35%) and Switzerland (39%). Others fared relatively well, like the UK and the European Union at 10% and 15% respectively.
All this uncertainty didn’t stop the markets from breaking one record high after another, with emerging markets leading the pack. In the US, this is true for all sectors (ex-healthcare). While this can be easily explained by macro-economic factors that typically favor emerging economies, such as a weakening USD, central banks easing cycles, slowing US growth, it is a lot harder to explain why the eurozone is doing so well this year given the poor growth prospects combined with political and fiscal problems. Sure, pharma and defense are doing well, but a weaker USD and tariffs could come back to bite investors who got too excited about the region.
Data source : Bloomberg
United States inflation remained stable at 2.7% in July, but that is before the impact of a large chunk of the tariffs came into effect. Unemployment figures remain healthy (though weakening), and PMIs are in full expansion mode. This put the Federal Reserve in a pickle. There is not much to justify lowering interest rates at the moment, and any action resulting from pressures of the White House would be damaging to the perceived independence of the Fed.
In Europe, worries are coming out of France, French Prime Minister Bayrou having called for a vote of confidence in him. This is a double or nothing bet, in which his government either collapses or secures the approval for his unpopular budget, which is at the center of the current drama. Furthermore, the French government debt is currently at risk of a downgrade. Investors are not waiting for it to happen, as yields are currently above that of countries like Greece, Portugal, Spain (3 of the countries formerly known as PIGS) and spreads with the German debt has never been so wide. We will know more about it in a week’s time.
China’s stellar performance this year can be explained by strong performance in the technology sector, supportive government policies and stimulus, but also from the difference in starting valuations, China having suffered in recent years more than the rest of the world.
Our summary recommendations
In our latest investment committee, we agreed that in the current euphoric stock market and ever decreasing yields environment, increasing our exposure to the much less volatile and predictable private markets makes more sense. In order to implement this view, we took the opportunity to approve 3 new funds from some of the biggest and most established firms in the evergreen private equity and private credit space.
Chart of the month
The Philadelphia Fed Regional Index is an indicator that measures the current conditions in the manufacturing sector in the district of Philadelphia, which is the third largest in the United States. It arises from a survey conducted by the Philadelphia Fed on the general health of the economy and businesses and is a good measure of changes in the prices that manufacturers pay for raw materials and supplies.
The Philadelphia Fed prices paid index increased 8 points to 66.8 in August 2025, its highest reading since May 2022. The implementation of tariffs on August 1st likely has something to do with the reading.
Source: Tradingeconomics.com
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