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Investment Monthly

Role reversal
05 December 2025
    Articles
    Download the full reportPDF, 7.9MB

    Key Takeaways

    • We expect a “role reversal” in areas of the macro and policy environment, with US leadership fading and market performance more dependent on profit and credit fundamentals rather than bullish sentiment
    • Market leadership and corporate profits will keep “broadening out” as growth converges in the west, and builds in Asia and other emerging markets. Economic derisking and improved policy frameworks have made those regions structurally safer and less volatile
    • With government bonds potentially less reliable as a portfolio hedge, multi-asset investors should manage the challenge of volatility by seeking to “diversify the diversifiers” with bond substitutes like hedge funds, infrastructure, and other real assets

    Macro Outlook

    • The US is expanding at a solid pace, but growth is unbalanced. AI-related capex is providing strong support, but a cooling labour market and tariff-driven price rises are a headwind to consumers
    • We expect US growth to converge towards rates seen in other developed economies. Tariffs pose upside risks to inflation
    • In China, we expect resilient but uneven growth, as supportive macro policies and export/manufacturing competitiveness offset tariff headwinds
    • We think premium growth opportunities lie in emerging and frontier markets, with economic power shifting to Asia and the Global South

    Policy Outlook

    • The US Fed is divided over the rate outlook, reflecting differing views on the medium-term trajectory for inflation and the labour market
    • After eight rate cuts, eurozone inflation is close to target and policy is in neutral territory, with the ECB taking a “watch-and-wait” stance
    • EM Asia has increased fiscal and industrial support to offset trade headwinds, as the region enters the late stages of its monetary easing cycle
    • China will rely on incremental and targeted policy to support economic and financial stability. Policy efforts will focus on strategic objectives such as technology innovation and self-reliance, and economic rebalancing

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