ISA Issues to Watch This Month: July 2025
How Healthy is the Global Economy
As economic growth results from the second quarter of this year are released by major economies such as the United States, China and the European Union, there will continue to be a great about of uncertainty surrounding the health of the global economy. In fact, much like in the first quarter of this year, GDP growth results from the second quarter of this year will be severely skewed by trade disruptions. As a result, even if second quarter growth results are better or worse than expected, the true state of the global economy will remain unclear. As a result, this will make continue to make it difficult for economic and business leaders to adequately forecast the health of their markets. Instead, it is likely that we will only begin to gain a true picture of the health of the global economy in the latter part of this year.
The Fallout from Iran’s Heavy Defeat
The humiliation of Iran’s defeat at the hands of Israel (and to a lesser degree the United States) poses a great challenge to the clerical regime that has ruled that country since 1979. Iran’s impotence in the face of the technologically-superior Israeli and US armed forces was a direct result of Iran’s isolation from the West, an isolation that hardened under its clerical leaders. Now, facing one of the greatest threats to their grip on power, Iran’s clerical regime is launching a major crackdown on its enemies, both real and perceived. In the coming week, it is likely to become clear whether or not Iran’s rulers will be able to retain their grip on power, or if popular unrest will finally lead to a regime change in Tehran. Should Iran’s rulers feel like their grip on power is weakening, they could intensify this internal crackdown, or they could launch attacks on their enemies across the Middle East, even if these spells certain military defeat for Iran.
Will Anything be Done About Debt?
Amid all of the political, economic and technological changes that have been taking place in recent years, the threat posed to the health of the global economy by rising public and private sector debt has been largely overlooked. This is a big mistake as unsustainable debt levels are one of the biggest threats facing the global economy today. In fact, few governments are taking the steps needed to bring this problem under control before it is too late. Worse, many governments have made new promises to either cut taxes or raise public spending in a manner that will raise debt levels further in the years ahead. What will happen? Well, much like debt crises in the past, the initial symptoms will be felt by weaker economies who can no longer finance their debt. However, this time around, it is some of the world’s most powerful economies that are facing the threat of a serious debt crisis. Should one or more of these countries default on its debts, the global economy could be facing one of its worst-ever crises.
Trump’s Newfound Power
While United States President Donald Trump has overseen one of the most chaotic governments in recent US history, he has managed to score some significant wins of late. Most notably, the US Supreme Court has issued a series of rulings that have strengthened President Trump’s political power. For example, the Supreme Court’s recent ruling that restricts the power of lower federal courts to block presidential executive actions was a major victory for President Trump as it paves the way for him to implement some of his more controversial initiatives. Even after President Trump leaves office, these rulings are likely to have dramatically altered the balance of political power in the United States in favor of the presidency. In the coming months, this is likely to embolden the Trump Administration to move ahead with many of its more ambitious plans, confident that it will have the backing of the Supreme Court.
The Era of Uncertainty
The most consistent feedback that we are receiving from our clients at this time is the fact that the dramatic increase in the level of economic, trade, political and technological uncertainty is causing them to delay major investment decisions. Much of this uncertainty is emanating from the United States, which historically has been a source of stability and confidence for businesses and investors. What is worse, this level of uncertainty shows no signs of improving in the coming months, and this is bad news for the outlook for the global economy. Should this uncertainty persist, or worsen, the outlook for economic growth over the near-term will deteriorate further. As a result of this extreme uncertainty, more businesses and investors are seeking the few remaining sources of stability and certainty, fueling surging valuations for assets that are perceived to be stable, such as gold.
Russia’s Summer Offensive
After the territorial gains won during the first months of the war in Ukraine, Russian offensives have proven to be something of a damp squib, with little territory won at an enormous cost in personnel and materiel. Now, Russia is slowly rolling out its 2025 summer offensive, hoping to wear down its Ukrainian foes at a time when the support of Ukraine’s leading backer, the United States, is less certain than before. In the air, Russia has dramatically increased its missile and drone attacks on targets across Ukraine, stretching Ukraine’s air defenses to the breaking point. However, Russia bigger challenge is to make major territorial gains in eastern or southern Ukraine, something that is exceedingly difficult in a era when technological developments significantly favor defending forces. If Russian forces can finally force a breakthrough, it may force Ukraine to sue for peace. However, if these ground offensives fail, or prove too costly, President Vladimir Putin could face growing opposition to this conflict among the Russian public.