Key global asset trends to watch

The war between Israel and Iran offered a real-time look at some new global cross-asset dynamics that can help investors understand the state of play in the first half of 2025 and what they can expect in the next six months.

- Jay Pelosky

Amid all the noise of the 12-day conflict, three points stood out.

First, the US dollar failed to mount any major advance during the roughly two weeks of the conflict, even though the DXY dollar index was sitting at a three-year low when Israel attacked Iranian nuclear facilities on June 13.

Second, the US Treasury market also failed to catch a bid amid the fighting, with the 10-year yield rising around 10 basis points right after the initial strikes. While yields have slipped since then, that appears to be related more to Federal Reserve dynamics than geopolitical drama.

And finally, there was oil, where the story was mixed. Prices jumped around 15% after fighting broke out, but then rapidly tumbled to pre-conflict levels once it appeared unlikely that there would be any significant supply disruption.

So, what does this episode tell us?

The real-time signals in the dollar and Treasury market reinforce the growing consensus that the US may no longer be the world’s safe haven, the world’s firefighter, if you will. Instead, in certain instances, America may now be the cause of the fire.

This speaks to perhaps the most important market trend of the past six months: the underperformance of US stocks relative to Europe and Asia.

Investors appear to be warming to the potential for a secular change in global equity leadership away from the US and towards the rest of the world. The MSCI ACWX index of non-US equities is up more than 13% year-to-date versus a roughly 1% gain for the S&P 500.