Mid-Year roundup

Hey, it's been some time since I put out one of these newsletter posts. I must be honest, the past few months have been swamped with launching Apex Capital, a BVI proprietary trading company that I co-founded.

It's been an exciting time with a lot of ups and downs and learning curves, and on top of that, I've been trading like a madman. The past few months have probably been the best-performing months for me from a trading perspective. I think this has a lot to do with the volatility that has blessed the markets due to Trump and his tariffs, the infamous TACO (Trump Always Chickens Out) trade and tantrums and with Powell and his fixed stances on monetary policy.

Despite being heavily swamped with company admin and setup processes, it has been difficult to overlook the catalysts that have reshaped the risk markets in the first half of this year. So, I wish to take this opportunity to explore some of the key catalysts that influenced my best trading months.

Trade Wars and Tariffs

U.S.-China Trade War

The U. S. and China trade relationship has had its ups and downs in 2025! As many of you might know, back in early April, Trump rolled out an ambitious tariff plan that introduced a baseline 10% tariff on almost all U.S. trading partners, with some Chinese imports facing much steeper rates, reaching up to 145%! This surprising move caught everyone off guard and led to quick retaliatory tariffs from China, including a 34% tariff on U.S. imports. Naturally, this raised concerns about a prolonged global trade war. The back-and-forth escalations resulted in sharp market drops, with the S&P 500 plunging nearly 6% and the Dow falling 5.5% in just one week, marking one of the toughest weekly losses since the COVID-19 crisis in 2020.

The immediate economic impact was noticeable: consumer and business confidence took a hit, and many rushed to import goods before the tariffs kicked in, which surprisingly led to an unexpected dip in U.S. GDP in Q1 2025. Big names like McDonald's, General Motors, and Apple expressed their concerns over significant earnings impacts due to rising import costs and a slowdown in consumer spending. China felt the pressure too, as factory production struggled under the burden of U. S. tariffs, leading the People's Bank of China to lower interest rates to support its economy.

Fortunately, a promising turn of events occurred on April 9 when Trump announced a 90-day pause on most new tariffs, creating a chance for negotiations with China. This pause was finalised in Geneva on May 12, resulting in an agreement to keep reciprocal U.S. tariffs on China while easing some Chinese retaliatory measures. This opened the door for future discussions and sparked a rally in U.S. stocks, with the S&P 500 bouncing back from earlier losses, although bond yields still climbed, showing ongoing uncertainty.

Despite the temporary pause, Chinese officials remain cautious about the broader implications of U.S. tariffs. Much will depend on the outcome of this week’s talks. The U.S. and China are set to resume negotiations today in London, with tariffs, rare-earth minerals, and advanced technology at the forefront. Tensions are high, with both sides accusing each other of reneging on commitments made during the May summit in Geneva. The stakes are considerable for the global economy, as both nations dig in on their strategic priorities amid mounting pressure.

U.S.-UK Trade Deal

On the U.S.-UK front, trade negotiations have definitely had their ups and downs, but they finally yielded a limited bilateral agreement that was announced on May 8! This deal, struck between President Trump and UK Prime Minister Keir Starmer, maintains Trump's 10% tariffs on British exports but does modestly expand agricultural market access for both countries. While the agreement helps the UK avoid the much higher tariffs that have been slapped on other nations, it still falls quite short of the comprehensive free trade deal many were hoping for, really highlighting just how challenging it is to align U.S. protectionist policies with the UK's post-Brexit trade priorities.

The UK's FTSE indices saw some nice gains right after the announcement, as investors were relieved that Britain managed to dodge harsher trade barriers. However, the deal's pretty limited scope has definitely raised some concerns about its long-term economic impact, especially as the UK continues navigating its complicated trade relationships with the EU and other global partners. The persistence of those U.S. tariffs keeps putting strain on UK exporters, and you can expect further negotiations to dominate discussions at upcoming international forums.

Even with this agreement in place, British officials remain cautious about the broader implications of ongoing U.S. trade policies and the potential challenges of maintaining competitive access to American markets while managing their complex web of international trade relationships.

Trump Tariffs

Trump's tariff strategy in 2025 has been much broader and more aggressive than anyone anticipated. These tariffs have been billed as the steepest tariff escalation in a century. This has driven prices up globally and led to many supply chain shocks and raised costs for U.S. importers. These companies now face some really tough decisions: do they absorb the hit, or do they pass it on to consumers? The resulting uncertainty has triggered some pretty volatile pricing dynamics across key sectors, with industries like auto manufacturing really bearing the brunt. Toyota's North American unit, for instance, has already flagged plans to offset rising tariff-related expenses, which is definitely an early signal of the global ripple effect we're seeing.

Economists are estimating that these tariffs could shave anywhere from 0.32% to 1.6% off U.S. GDP growth over the next three years, depending on their scope and how long they last. The OECD has actually downgraded global growth forecasts to 3.1% in 2025 and 3.0% in 2026, with Canada and Mexico getting hit particularly hard. Mexico could potentially tip into recession! With rising prices and slowing growth, fears of stagflation are definitely gaining traction, putting policymakers in a difficult bind.

As of today, we're just 29 days out from the Trump administration's July 8 deadline to finalise trade deals.

So what's happened so far? Well, the U.S.-UK deal set the tone early, but even that "success" left most tariffs intact. Japan is really pushing back hard. Vietnam is absolutely racing against the clock. China, which still controls 85% of rare earth processing, hasn't budged at all on export restrictions. And beyond the UK, clear wins are remaining pretty elusive.

The broader implications are hard to ignore! Global trade is slowing down significantly. Markets are definitely on edge. Our allies are feeling strained. And long-term supply chains remain incredibly fragile.

This has become a full-blown pressure campaign with some serious geopolitical weight behind it! All eyes are now on July 8, it's going to be really interesting to see how this all plays out.

Powell’s Remarks

Fed Policy Dynamics

The Federal Reserve has definitely been navigating some pretty choppy waters in 2025. As many of you might know, Powell has kept the federal funds rate steady at 4.25%–4.5% since December 2024, adopting a really cautious stance as all these trade policy uncertainties swirl around. The key economic indicators from March to April 2025 highlight just how challenging it's been for the Fed to balance growth and inflation.

Core PCE inflation, which is the Fed's favourite measure, was sitting at 2.8% year-over-year back in February 2025 but actually eased to 2.5% by April 2025, the lowest we've seen since March 2021. That sounds pretty good, right? Well, Powell has been warning that tariffs are "highly likely" to temporarily bump inflation back up, and there's potential for more sustained effects if these trade disruptions just keep going.

The economic growth picture hasn't been great either. U.S. GDP growth projections for 2025 have been revised downward because of trade uncertainties and weaker consumer spending. In Q1 2025, GDP actually contracted at an annualised rate of 0.2%! This was driven partly by inventory adjustments and increased imports as companies rushed to bring stuff in ahead of those anticipated tariff hikes.

Fortunately, the labour market has remained pretty resilient! We've been adding an average of about 149,000 jobs monthly over the past year, including an estimated 120,000 jobs in March 2025. The unemployment rate has stabilised at 4.2% as of April 2025. But Powell has definitely noted potential risks of rising unemployment if these tariff-related disruptions really intensify.

Market Volatility

U.S. stock markets have faced some turbulence in Q1 2025. The S&P 500 declined over 20% from its highs in February through March, though it saw some decent recovery in late April. The Nasdaq Composite experienced smaller losses but showed surprising resilience in select sectors. The 10-year Treasury yield rose well above 4.5% by mid-May 2025, really reflecting investor concerns over fiscal deficits and tariff-driven inflation pressures.

Powell's remarks over the past three months really underscore the Fed's "wait-and-see" approach as they grapple with the dual risks of higher inflation and slower growth. At the March FOMC meeting, policymakers actually cut their 2025 growth forecast and raised inflation projections, reducing expected rate cuts from three to just two for the year. Powell emphasised that tariffs, being "larger than expected," really complicate the Fed's dual mandate of maintaining 2% inflation and maximum employment. He's even warned of a potential "stagflationary shock," where prices rise while jobs and growth decline, a scenario we haven't seen since the 1970s!

In April, Powell reiterated these concerns at the Economic Club of Chicago, noting that the tariffs' economic impact is "significantly larger than anticipated" and could lead to "continued volatility" in markets. He stressed the importance of preventing a one-time price increase from becoming entrenched inflation, suggesting the Fed would prioritise price stability over immediate rate cuts, even as markets were taking a beating.

As of this week, have have the final set of CPI and PPI inflation data prints before the next FOMC meeting on the 18th of June. It will certainly be interesting to see how this data print reflects in the expectations of the market towards rate cuts. As of now, the market is fully expecting a rate pause to be the outcome, with the first cut to be seen in September this year.

Political Drama

Here's where things get interesting! Trump's public criticism of Powell has intensified, with the president calling for rate cuts and even labelling Powell a "fool" for not complying. Trump's threats to fire Powell, though legally questionable, have raised some serious concerns about Fed independence and credibility, but we all know the most Trump can do is apply pressure.

Powell has firmly defended the Fed's autonomy, stating that monetary policy decisions are based solely on economic data and not political pressures. This tension is adding another layer of uncertainty for investors, and it's going to be really fascinating to see how this political drama plays out alongside all these economic challenges!

Market Outlook for H2 2025

Global Economic Outlook and Market Dynamics

The second half of 2025 is definitely presenting some pretty challenging conditions for both the U.S. and global economies. As many of you might know, the OECD's downgraded global growth forecasts (3.1% for 2025, 3.0% for 2026) reflect the drag we're seeing from those U.S. tariffs, with Canada and Mexico facing particularly severe impacts. In the U.S., economists are projecting GDP growth of less than 1% for the year! And core PCE inflation is expected to rise to 3.4% by year-end due to those tariff effects we've been talking about. The labour market, while currently stable, definitely faces risks of rising unemployment (projected at 4.5% by December) if these trade disruptions just keep persisting.

Globally, the risk of further trade fragmentation is looming large! China's economic challenges and retaliatory tariffs could lead to further currency devaluations or stimulus measures, while the EU and other regions may face pressure to align with U.S. trade policies. The uncertainty surrounding all these developments is already curbing investment and consumer confidence (hence the bond market yield spike), which is definitely increasing the likelihood of a global slowdown.

Market Volatility and Investment Strategy

U.S. equity markets are expected to remain pretty volatile through 2025. The S&P 500, Nasdaq, and Dow have shown some impressive resilience, recovering from April's sharp declines, but tariff uncertainties and rising bond yields definitely pose ongoing risks. Investors are really shifting toward defensive strategies, favouring dividend-paying stocks with strong balance sheets and lower exposure to tariff-affected sectors like consumer cyclicals and manufacturing.

My bias here is to maintain exposure to risk assets but really prioritise sectors with less volatility, such as utilities and healthcare, which are much less sensitive to trade disruptions. The Fed's cautious stance suggests no immediate rate cuts, which could pressure growth stocks, particularly in tech, while value stocks may outperform!

Bitcoin's performance in 2025 has been pretty mixed, with heightened volatility tied to all these macroeconomic uncertainties. Tariffs and rising inflation expectations have boosted Bitcoin's appeal as an inflation hedge, driving some periodic price surges. It's very possible we could see similar price action to summer last year for Bitcoin while these uncertainties at play dissolve.

On the chart below, I've marked out some key areas that I'm paying close attention to for high probability setups on Bitcoin. I'm being pretty cautious with the current price action, but here's what's interesting: gauging by the fact that retail is currently majority short on the local 4H structure, we'll likely see a squeeze to flush them out before we see any real downside pressure kick in. Get retail to flip long and be bullish, and then reverse the price to liquidate them. After all, the market always makes a fool of the most.

I'm essentially looking at two main scenarios here. First, I'm expecting a lower high rejection as per the chart for continuation down to that 91k territory. Alternatively, if retail just continues to pile into shorts and we see the squeeze continue into a new All Time High (ATH), I'd expect a sweep and failure of the current ATH to hedge my current long exposure with shorts.

If we hold above the current ATH on a break, that completely invalidates all the short plays, and we'd be looking at a different setup. But until that point happens, my sentiment for BTC remains really consistent with how it's been throughout this entire year. Dips are definitely for buying, and I'll continue to hedge short against my longs until we get that ATH flip and hold.

The retail positioning is giving us some pretty valuable insight into potential market moves. When you see this kind of lopsided positioning, especially on shorter timeframes, it often sets up these counter-trend moves that can catch a lot of people off guard. The key technical levels I'm watching are crucial here, and the macro environment we've been discussing plays into how Bitcoin might react at these critical support/resistance zones. It's going to be fascinating to see which scenario plays out over the coming weeks!

Key Risks and What to Watch

The stagflation risk is significant; the combination of tariff-driven inflation and slowing growth raises the spectre of stagflation, forcing the Fed into a delicate balancing act. Powell's focus on anchoring long-term inflation expectations suggests rates may remain elevated longer than anticipated, which could potentially dampen equity market gains.

Trade policy uncertainty is another huge factor. That 90-day tariff pause with China expires in early July, and renewed escalation could trigger another market sell-off. The resolution of these trade deals is absolutely crucial before the deadline if we want markets to continue on their recovery road.

The Fed's Financial Stability Report noted elevated asset prices despite trade-related turbulence, suggesting potential for pretty abrupt repricing if negative shocks occur. Hedging strategies and geographic diversification are definitely recommended to mitigate these risks. It's going to be interesting to see how all these moving pieces come together in the coming months!

Conclusion

As markets transition into the second half of 2025, heightened volatility patterns are anticipated to persist. But as we all know, this market can change overnight, and with the irrationality of Trump's Twitter feed, things can go pear-shaped very quickly. So I'm maintaining my cautious, diversified approach, really focusing on assets with strong fundamentals to navigate this uncertain economic landscape we're all dealing with.

The interconnected nature of these trade dynamics, Fed policy decisions, and market reactions really shows just how complex the current environment has become.

I'm going to continue monitoring these developments really closely and will definitely provide updates in our next newsletter! There's so much happening right now, and with that July 8 deadline approaching for those trade negotiations, things could get really interesting very quickly.

Don’t miss out - join us for free!

Get exclusive access to top-tier trading insights and strategies from the institutional front lines. Each week, we deliver actionable market trends, cutting-edge risk management techniques, and lessons learned from both the retail and institutional worlds.

Subscribe now to Peak Performance for your backstage pass to the elite market mindset!