Investment Committee - May 2025

Policy, Risk & Positioning

The May 2025 Investment Committee meeting opened with a thorough discussion of how financial markets remain at a critical crossroads. With geopolitical developments and macroeconomic recalibrations driving investor sentiment, the committee focused on understanding current market dynamics, reassessing positioning, and anticipating the effects of potential policy shifts. In an environment defined by uncertainty, our team emphasized caution, tactical flexibility, and data-driven decision-making.

Navigating a Landscape of Geopolitical and Macro Shifts

The core issue identified early in the meeting was how markets are presently caught between geopolitical noise and macroeconomic adjustment. Notably, gold reached another record high in April, reflecting a flight to safe-haven assets in response to fresh US tariffs and renewed sanctions targeting technology companies. At the same time, oil prices have slumped to a two-year low, and US-China dialogue on tariffs remains stalled.

In terms of market positioning, the committee noted that investor strategies are currently skewed towards being long gold, holding some duration exposure, and favoring defensive sectors. In the near term, caution prevails: there is reduced enthusiasm for growth stocks, a greater focus on carry trades, and heightened sensitivity to Federal Reserve communications regarding interest rate policy.

Policy Shifts and Structural Market Changes

However, the discussion quickly turned toward the pace of change and underlying macroeconomic realignments. A key observation was the evolving policy environment under President Trump. For the first time in years, the US administration is enacting support measures for traditional industrial sectors such as steel, shipping, automotive, and semiconductors.

These policy moves challenge a system long reliant on debt-fueled and, in many cases, unproductive capital allocation. Some committee members highlighted that Trump's unpredictability may actually serve a stabilizing function: by introducing market volatility, it has reduced system-wide leverage and prompted more risk-aware positioning. In effect, naked or overly aggressive investment positions are being hedged more rigorously.

This environment has increased market skew in 2025. Dealer gamma exposure rose meaningfully during the month, with European equities rallying and US equities not far behind.

Market Hedging, Leverage, and Positioning

While a move toward recent market lows cannot be ruled out, our base case scenario foresees markets gravitating toward the upper end of recent ranges—not breaking lower. Importantly, the committee observed that investors are actively adding hedges to existing positions. These hedges now require more frequent rebalancing, a sign of heightened vigilance. Moreover, current leverage is markedly lower compared to levels prior to the latest market correction.

Outlook on the US Dollar and Interest Rate Path

Discussion then shifted to the US dollar, where the prevailing view among members is that Trump’s presidency is likely negative for the currency in the medium term. That said, after a significant decline earlier this year, the dollar may see a technical correction during May.

As for interest rates, there was no consensus reached on the timing or magnitude of rate cuts in either the EU or the US. The committee concluded that investment strategies should remain data-dependent and agile, as incoming macroeconomic indicators are expected to shape policy expectations further.

Conclusion

The May Investment Committee meeting underscored the need for adaptive portfolio management in an environment shaped by shifting geopolitics, evolving macro policy, and ongoing market recalibration. Although uncertainty remains high, particularly regarding rates and currency trajectories, the current reduction in leverage and increase in hedging suggest that markets are better positioned to absorb future shocks. The committee maintains a cautious, flexible stance and will continue to adjust allocations as clarity emerges from incoming data and policy developments.

Authors: John Couletsis and Kostas Metaxas