Global Markets: Expanding Your Investment Horizons

As investors navigate the evolving landscape of 2025, understanding the forces shaping global markets is essential for sustainable success.

Understanding the Global Economic Backdrop

In 2025, Global growth is projected to be subdued across many regions, reflecting a transition from the rapid recoveries witnessed in recent years. The United States is expected to record GDP growth of 2.0%, while the Eurozone remains challenged at 0.9%.

China’s growth rate of 4.2% marks a notable slowdown from its historical average, yet it remains a critical driver of emerging markets growth. Indeed, emerging economies are collectively forecast to expand by approximately 3.7% this year, more than doubling the pace of advanced economies. Persistent inflationary pressures and geopolitical tensions continue to limit central banks’ flexibility, keeping rates elevated and policy options constrained.

Key Market Narratives and Emerging Risks

The interplay of trade policy, fiscal stimulus, and tariffs has become a dominant narrative in U.S. markets, generating both supply chain shocks and demand shifts on a global scale. This post-globalisation environment of fragmentation heightens investment risk, as protectionist measures and industrial policies reshape cross-border flows.

Geopolitical instability further compounds market volatility. Investors must remain vigilant to developments in trade negotiations and diplomatic relations, understanding that sudden policy shifts can lead to rapid repricing across asset classes.

Asset Class Performance: Finding Balance

2025 has seen varied performance across equities, fixed income, private markets, and real assets. While developed market sovereign bonds have struggled under rising yields and persistent inflation, corporate credit segments offer pockets of opportunity. Meanwhile, alternative assets are gaining traction as investors seek diversification beyond traditional holdings.

Private market fundraising remains near its lowest level since 2016, yet capital deployment is up double digits, highlighting robust transaction activity in secondaries and GP stakes. In real assets, inflation-protected bonds, real estate, and select commodities continue to serve as effective hedges against rising price pressures.

Regional and Structural Dynamics

Emerging markets have shown remarkable resilience despite global headwinds. Supported by strong domestic consumption and prudent monetary policies, they are positioned to outpace developed economies in both GDP and earnings growth through 2026.

• EMs projected to grow 3.7% in 2025, driven by India and Indonesia.
• Inflation in EMs is expected to moderate to 5%, improving real returns.
• Natural resource-rich nations are attracting growing capital inflows.
• Latin America outperforms amid political and economic stability.

Developed markets face contrasting fortunes. The U.S. edges towards a potential soft landing amid disinflation, while Europe contends with sluggish productivity and structural challenges. Investors should anticipate market rotations as growth trajectories converge.

Investment Themes and Practical Strategies

Against this complex backdrop, certain themes can guide portfolio construction:

• Diversification across asset classes, geographies, and strategies.
• Value stocks in energy and materials poised to benefit from inflation.
• Active selection in EMs to capture high-growth opportunities.
• Embracing volatility as a strategic rebalancing opportunity.
• Allocating to high-quality credit and alternative yielding assets.
• Positioning for long-term gains in AI and productivity-enhancing tech.

Implementing these strategies requires a disciplined approach: maintaining liquidity buffers, adjusting exposures in response to shifting macro signals, and leveraging market dislocations for tactical enhancements.

Building a Resilient Portfolio for 2025 and Beyond

To thrive in an environment of moderated growth and elevated uncertainty, investors must prioritize resilience alongside return. A well-balanced portfolio might combine core equity holdings with targeted allocations to credit, real assets, and private vehicles. Such an approach can mitigate downside risk while preserving participation in market upside.

Technological advances—particularly in generative AI—are transforming operational efficiencies and creating new investment frontiers. Productivity gains from AI have the potential to offset demographic headwinds and drive sustainable growth across sectors.

Finally, adopting a forward-looking lens on structural themes such as clean energy transition, digital infrastructure, and evolving consumer behavior can yield durable returns. Identifying companies and strategies at the forefront of these shifts is critical for capturing value over the next decade.

Actionable Insights:

• Review geographic exposures and consider increasing EM weight given superior growth prospects.
• Shift bond allocations towards inflation-protected instruments and high-quality corporate credit.
• Incorporate alternatives to enhance yield and reduce correlation with traditional markets.
• Leverage volatility by systematically rebalancing and capturing risk premia.
• Invest in technology-driven themes to harness long-term productivity trends.

While global growth may be more muted in 2025, the array of opportunities across regions, sectors, and asset classes remains robust. By embracing diversification, exercising active selection, and aligning with structural growth drivers, investors can expand their horizons and build portfolios equipped to navigate the challenges and opportunities that lie ahead.