2025 Global Equity Outlook
Third Quarter
Key Takeaways
Developed Markets: Tariff policy remains a potential risk to growth, though signs of progress have emerged, while European and Japanese companies may benefit from trends in their markets.
Emerging Markets: Higher tariffs also pose a threat to emerging markets, though attractive valuations and other tailwinds could help companies in those countries.
Developed Markets
2025 Outlook: Continued Concern Over Tariffs
The outlook for U.S. tariff policy keeps shifting, often abruptly. However, some of the uncertainty has started to clear, raising hopes that markets can avoid the worst potential outcomes.
The U.S. and China have stepped back from their triple-digit tariff hikes as they continue to negotiate. The U.S. is also reporting progress in its other trade talks, with its recent agreement with the U.K. serving as an early example.
Other countries are seeking deals with each other as well. India and the U.K. have finalized a trade agreement that’s been under discussion for a few years.1
While the risk from tariffs may have lessened, it hasn’t disappeared. The International Monetary Fund now forecasts slower economic growth for this year and next, citing higher effective tariff rates.2
Europe Prepares for an Upswing in Demand
Several forces are combining to create new tailwinds for European companies.
The EU is undertaking a significant stimulus program to boost the bloc’s defense capabilities. The effort includes a 150 billion euro fund that EU countries can use for missiles, defense systems and other needs. Most of this money must go to firms from member nations or select partners, which could strengthen the region’s defense industry.
At the same time, Germany has announced its own 1 trillion euro stimulus that will cover defense and infrastructure investments.
These spending plans look like good news for industrials, which make up a larger share of Europe’s economy than they do in the U.S. We also see signs of a bottoming in demand and an uptick in manufacturing orders.
The financial sector, and banks specifically, could gain from improved loan pricing and increased economic activity.
Reforms Could Boost Select Japanese Firms
The U.S. buys about 20% of Japan's exports, so higher tariffs threaten Japan’s economy.3 However, we continue to see potential in select Japanese companies benefiting from larger trends in the country.
These tailwinds include the nation’s digital transformation initiative, which seeks to upgrade information technology across the public and private sectors. This effort has increased demand for IT consulting firms based in Japan.
Corporate governance reforms, including greater transparency and more effective capital use, could also make Japanese companies more competitive.
Finding a Way Forward Amid 2025’s Global Uncertainty
We think it’s likely that markets will remain volatile because of tariff uncertainty and a rising risk of slower economic and earnings growth. We believe taking an active approach while remaining selective about opportunities can help investors navigate the coming quarters.
We believe that investing in businesses with resilient and sustainable growth drivers will be advantageous for investors.
Emerging Markets
What Tariffs Could Mean for Emerging Markets
The introduction of higher tariffs has created some of the biggest risks to the economy and markets. Tariff de-escalation could continue to improve investor sentiment toward emerging markets (EM).
While tariffs still present a risk to EM, there are signs of progress. After an initial agreement between the U.S. and China, other countries such as Brazil, India and South Korea continue to negotiate.
Meanwhile, downward pressure on the U.S. dollar has historically benefited emerging markets. Attractive EM valuations, combined with a need for greater diversification, could also serve as tailwinds for companies in emerging markets. Many EM countries also have room to cut interest rates.
India Draws Strength From Domestic Economy
India may find itself in a relatively strong position to withstand the ups and downs of global trade.
The International Monetary Fund forecasts that India's gross domestic product (GDP) will grow more than 6% this year and next year. This is better than any other developed or emerging market in the IMF’s most recent outlook .4
India’s domestic economy could also cushion it from any slowdown in trade. Consumption continues to recover, supported by a less restrictive policy environment. Inflation has eased, and the agriculture sector is poised to perform well, which could keep food costs down.
Stronger consumption could benefit consumer-sensitive stocks, such as those in tourism, and financials could see better earnings visibility.
The Reserve Bank of India also sees potential for India as a “connector country.”5 Given its stability and strong fundamentals, it could serve as an intermediary in areas such as pharmaceuticals, technology and digital services.
China Puts New Emphasis on Consumer Demand
China, the world’s leading exporter, is trying to encourage its consumers to spend more. Higher domestic demand could serve as a sustainable source of growth while hedging against external economic shocks.
As part of this, the government has announced stimulus initiatives designed to support consumers. These include employment subsidies, efforts to stabilize the real estate sector, and a trade-in program to help buyers upgrade their smartphones, appliances and other goods.
Making this transition could take time. Chinese consumer sentiment has struggled since COVID-19 and the country’s real estate crisis. Households there tend to have a high savings rate.
Until consumer confidence and property prices recover, China’s market will be sensitive to U.S. tariff news, good or bad, with increased interest in domestic policy support.
We believe the potential upside of higher demand could be sizable. It might help China’s homegrown consumer companies and, to a lesser degree, foreign companies that sell to Chinese customers.
Co-Chief Investment Officer
Global Growth Equity
2006
1984
¹U.K. Department for Business & Trade, “UK-India Trade Deal: Conclusion Summary,” May 15, 2025.
²International Monetary Fund, “World Economic Outlook,” April 2025.
³Japan’s Ministry of Finance, “Trade Statistics: Value of Exports and Imports 2023 (Calendar Year),” November 13, 2024.
⁴International Monetary Fund, “World Economic Outlook,” April 2025.
⁵Rekha Misra, Asish Thomas George, and Shashi Kant, “State of the Economy,” RBI Bulletin, May 2025.
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References to specific securities are for illustrative purposes only and are not intended as recommendations to purchase or sell securities. Opinions and estimates offered constitute our judgment and, along with other portfolio data, are subject to change without notice.
International investing involves special risks, such as political instability and currency fluctuations. Investing in emerging markets may accentuate these risks.
Investment return and principal value of security investments will fluctuate. The value at the time of redemption may be more or less than the original cost. Past performance is no guarantee of future results.
Historically, small- and/or mid-cap stocks have been more volatile than the stock of larger, more-established companies. Smaller companies may have limited resources, product lines and markets, and their securities may trade less frequently and in more limited volumes than the securities of larger companies.
Diversification does not assure a profit nor does it protect against loss of principal.
Generally, as interest rates rise, bond prices fall. The opposite is true when interest rates decline.
Past performance is no guarantee of future results. Investment returns will fluctuate and it is possible to lose money.
The opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments' portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.