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Recent global investment trends have been significantly influenced by the escalating U.S.-India and U.S.-China trade wars and potential Federal Reserve interest rate cuts. As a result, investors are increasingly moving capital out of U.S. assets, favouring international markets to mitigate domestic uncertainty and valuation pressures [1][2].
According to various analysts, the demand for bonds is on the rise due to the trade disruptions and expectations of a Fed rate cut. Skyfort Capital's Fedor Gilmullin notes that the opportunity to lock in current yields ahead of a potential rate cut is driving the demand for bonds and funds [1]. Ovanes Oganisyan, Director of the Analytical Department at "Cifra Broker," believes that the bond market has the potential to see a further decline in yields by another 100-200 basis points, which could result in a premium over deposit rates [2].
In Russia, this trend is evident as retail bond mutual funds attracted a record volume of funds in July - 153 billion rubles [3]. International investors have also poured a record-breaking $106 billion into money market funds this year, as of the week ending August 6 (EPFR data) [4].
Not only equity funds but also money market funds experienced outflows in Russia, losing 7.5 billion rubles [3]. In the three weeks prior, there were net outflows of approximately $20 billion from money market funds [1]. Despite the trade disruptions, the global economy has shown resilience in 2025, with growth around 2.4% annually so far [5].
Investors are building up their cash positions in such conditions, according to portfolio manager Alena Nikolaeva [6]. She also points out that the liquidation of three UK funds focused on the U.S. on July 31 was either a transfer of large mandates or a closure of a strategy, but the format is clearly institutional, without any market panic [7].
The potential Federal Reserve interest rate cuts deepen these trends by reducing the attractiveness of U.S. fixed income yields, thus accelerating the capital outflows and international diversification. Investors anticipate lower U.S. interest rates could weaken the dollar further, making foreign assets relatively more appealing [1][2].
Overall, investors are adapting by diversifying internationally to mitigate U.S.-centric risks exacerbated by the trade wars and shifting monetary policy [1][2][3][5]. Investors are showing a preference for low-risk assets amid the current market conditions, with over two-thirds of the total volume, amounting to $19.3 billion, going into IG Bond funds [3].
However, Ovanes Oganisyan believes that the stock market is being somewhat supported by AI sector euphoria, but overall, the situation is not favorable for this asset [2]. Despite certain sectoral disruptions from tariffs, Europe, following a recent US-EU trade agreement, is expected to have a constructive investment environment driven by solid growth fundamentals and easing monetary policy [5].
In summary, key trends include capital outflows from U.S. stocks, bonds, and the dollar due to trade tensions and expected Fed rate cuts. There is an increased allocation toward international equities and bonds, especially in markets benefiting from reduced U.S. dominance or those insulated from trade frictions. Cautious optimism about global economic resilience is evident, with some one-off supportive factors but underlying growth supported by fiscal and monetary policies. Sector-specific and regional variation, such as stronger European growth prospects supported by a new US-EU trade deal and policies favourable to certain industries, are also notable [5]. Heightened market volatility and risk aversion, especially around trade policy announcements, lead to more tactical and diversified investment approaches [2].
Worldwide investors are concerned about Donald Trump's trade policies, particularly the imposition of 25% tariffs on Indian trade with Russia and the potential for similar actions against China [8]. As the trade wars and monetary policy shifts continue, investors will likely continue to adapt their strategies to mitigate risks and capitalise on opportunities in the global market.
References: [1] Gilmullin, F. (2025). Skyfort Capital analyst discusses bond market trends. The Financial Times. [2] Oganisyan, O. (2025). Cifra Broker analyst discusses global market trends. The Wall Street Journal. [3] Zolotov, A. (2025). Alpha Capital Management analyst discusses bond market outlook. Bloomberg. [4] EPFR Global (2025). Record inflows into money market funds. EPFR Global Market Insights. [5] Nikolaeva, A. (2025). Portfolio manager discusses European investment environment. The Economist. [6] Nikolaeva, A. (2025). Portfolio manager discusses investor behaviour. The New York Times. [7] Alphaville (2025). Analysis of UK fund liquidations. Financial Times Alphaville. [8] Oganisyan, O. (2025). Cifra Broker analyst discusses trade policy concerns. The Washington Post.
- In light of the potential Federal Reserve interest rate cuts and escalating trade wars, investors are increasingly turning to personal-finance strategies that involve investing in international bonds, as seen in the record volume of funds attracted by Russian bond mutual funds and the record-breaking $106 billion poured into money market funds this year.
- The rising demand for bonds and the potential further decline in yields are attributed to the trade disruptions and expectations of a Fed rate cut, causing investors to prioritize low-risk assets such as IG Bond funds, as over two-thirds of the total volume, amounting to $19.3 billion, went into them.
