June 26, 2025

Ceasefire & Consequences

Market Commentary

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After nearly two weeks of escalating airstrikes, the ceasefire between Iran and Israel brokered by U.S. President Donald Trump, has so far held. While this development brought temporary relief to global markets, especially in easing fears of a full-scale Middle East war, it hasn't resolved the deeper issue looming over investors worldwide: inflation.

Now that geopolitical tensions have cooled, the market’s attention is shifting sharply toward inflation and its far-reaching consequences. This shift is not without reason. Inflation doesn’t just affect everyday prices, it influences interest rates, currency values, capital flows, and most importantly, investment decisions.

Recent data from the University of Michigan showed U.S. one-year inflation expectations have climbed above 5%, far exceeding the current headline rate of 2.4%. What’s driving this surge? According to our latest macro reports, it’s a combination of persistent global instability, stalled tariff negotiations, and Trump’s massive “Big Beautiful Bill” (BBB), which is expected to widen the U.S. budget deficit and introduce a controversial “revenge tax” (Section 899) on foreign passive income.

But that’s not all. Another powerful structural shift is quietly gaining pace: de-dollarization. As more countries seek to reduce reliance on the U.S. dollar, global demand for USD could weaken, putting downward pressure on the currency and amplifying inflation. A weaker dollar also increases volatility for emerging markets like Indonesia.

And that brings us to the heart of the issue: what does this mean for the Indonesian equity market?

Indonesia, with its twin deficits and $245 billion in net external liabilities, is particularly vulnerable to global shocks. A weaker dollar might sound positive at first, but for Indonesia, it could translate to foreign outflows and rising inflationary pressures, especially if capital flees U.S. bonds and commodities surge in response.

That’s why investment strategy in the second half of 2025 must be more selective and defensive.

The winners in this environment? Companies with exposure to U.S. dollar revenues, energy, and gold. Sucor highlights names like BRMS, DEWA, ENRG, PGAS, UNTR, ADRO, AADI, INDY, TINS, and TPMA as resilient picks that can weather global inflation and currency volatility.

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