Investment Monthly
Pricing a perfect picture?
05 September 2025
Key Takeaways
- A regime of G-zero economics is emerging, where no one economic power is leading the global order and is characterised by supply shocks, constrained growth, and high and volatile inflation
- As US exceptionalism fades, and with global profits growth broadening out, we maintain a relative preference for markets outside the US
- The US dollar remains over-valued and is expected to face continuing weakness, which should be a catalyst for emerging market assets
- Portfolio resilience can be built with “safety substitutes” including selective high-quality fixed income, multi-factor strategies, and real assets like gold
Macro Outlook
- Policy uncertainty remains high, with tensions between the US administration and the Federal Reserve the latest example
- The economic outlook is clouded by uncertainty about the impact of tariffs amid signs of cooling growth – yet market volatility has fallen sharply over the summer, with many markets pricing stronger growth
- We think premium growth opportunities lie in emerging markets, with economic power shifting to Asia and the Global South
- In Asia, trade reforms, stronger regional co-operation, and export diversification, should boost resilience amid tariffs and external headwinds
Policy Outlook
- US Federal Reserve Chair Powell raised the prospect of a September rate cut amid a “shifting balance of risks”, with near-term inflation risks tilted to the upside and employment risks tilted to the downside
- Eurozone inflation is at target but could ease on slower wage growth, tariff shocks, and euro strength – potentially allowing further ECB easing
- Growth concerns, benign inflation, and USD softness in 2025 aid the case for more monetary easing and fiscal support in EM Asia
- Supportive macro policy in China is focused on structural rebalancing – mainly via supply-side reforms to restore corporate profits and boosting consumption on the demand side – as well as longer-term strategies