Global Investment Market Outlook: Q3 2025 Data & Insights
Though we manage funds for the long term, here are our thoughts on markets as we look forward over the coming quarters.
Despite equity market weakness following news of wide-ranging US trade tariffs in April, subsequent delays in their implementation enabled markets to recover lost ground and finish in positive territory. We continue to monitor the trade tariff situation, and conflicts in the Middle East and Ukraine. Despite risks posed by trade policies, we currently believe several major central banks may continue to cut interest rates in the second half of 2025. We believe in having a spread of global equity market exposure.
In fixed income, credit still lacks an outperformance catalyst, in our view. If there is modest growth, and inflation is limited, shorter-term bonds could fall, benefiting bond prices in this part of the market. However, bond markets could see further volatility on inflation surprises or interest rate updates.
In our view, holding a diversified spread of government bonds and credit, in different geographies and with different characteristics, can continue to provide income-generation benefits.
UK equities
According to the Bank of England (BoE), inflation could remain close to current levels until the end of the year, following a recent step up. Manufacturing data has remained in contraction.
US equities
After keeping interest rates on hold during the second quarter, US Federal Reserve policymakers still expect two further cuts this year. Meanwhile, trade tariff uncertainty could continue amid ongoing negotiations between the US and other major economies. However, we believe long-term US growth prospects remain superior to many other developed markets.
Europe equities
The European Central Bank’s (ECB) June interest rate cut was its eighth of the current cycle, but it may slow the pace from here as inflation is broadly in line with its target level. Valuation levels remain attractive but there are no immediate catalysts amid lacklustre growth.
Any further US-dollar weakness or positive news on trade negotiations with the US may boost sentiment towards the Asia and emerging market regions.
Japan equities
The Bank of Japan has been increasing interest rates to normalise its monetary policy. However, the last increase came in January 2025, and there has been caution on geopolitics and US trade tariff uncertainty. In the longer term, Japan may continue to benefit from structural tailwinds.
Asia/Emerging markets
Any further US-dollar weakness or positive news on trade negotiations with the US may boost sentiment towards the Asia and emerging market regions, which we believe remain attractively valued and with appealing long-term growth potential.
Developed Market Government Bonds
The BoE and ECB continued to reduce interest rates during the second quarter. Policymakers, however, highlighted caution around issues such as trade tariffs. We think that the short end of the yield curve offers the best risk-return trade-off.
In the longer term, Japan may continue to benefit from structural tailwinds.
Credit
Short-term volatility may continue to present credit opportunities. However, spreads are narrow, restricting the potential for near-term outperformance, in our view.
Emerging Market Debt
Emerging market debt (EMD) valuations are broadly attractive and EMD could benefit from further US interest rate cuts. If recent US-dollar weakness continues, it is likely to benefit the asset class. Additionally, several key emerging economies have demonstrated pragmatic fiscal policy initiatives and have managed to tame inflation. We remain watchful for idiosyncratic risks from, for example, local politics.
