House View Q4 2025: Active and vigilant
Our view of global markets
New world flux
- We view 2025 as a year of two distinct phases. Following the initial shock of “Liberation Day”, markets are coming to terms with a new reality marked by reduced political and economic visibility. This evolving backdrop calls for caution but also opens the door to opportunities for actively positioned investors.
- Growth is slowing below trend, with a broad-based, orderly deceleration across regions. A new geopolitical and economic framework is emerging, as the previous global model – built on persistent US external imbalances – has effectively run its course. Themes like European sovereignty – broadening from defence to other strategic industries – may offer opportunities in this new landscape.
- Diversification will be essential, including across a broader set of assets. As countries pursue increasingly divergent monetary and fiscal policies, the global investment picture is becoming more fragmented. Yields have moved at different paces globally, underscoring the need for diversified bond portfolios.
- In the US, inflation is likely to reaccelerate, partly driven by tariffs. Elsewhere, weaker growth should keep inflation subdued. As the US Federal Reserve resumes cutting rates, any perception that political motives are overriding inflation dynamics could be a red flag for markets.
- While the remainder of the year may be challenging, it’s unlikely to be worse than that. It would take significant bad news to push markets decisively into risk-off mode. But as the global economy enters a more fragile phase, investors should maintain agile portfolio positioning and consider volatility index exposure to stay active and vigilant.
Chart of the quarter
Uncertainty reigns after tariff turmoil
US tariff policy has been a key source of uncertainty this year. But while tariff levels have fallen from their peak, the World Uncertainty Index* remains at a near-term high, suggesting a legacy of tariffs is a less predictable global economy. While that could be a challenge for global trade, an environment of less economic visibility may be fertile ground for active managers.
*The World Uncertainty Index (worlduncertaintyindex.com) is computed by counting the frequency of the word “uncertain” (and its variants) in the Economist Intelligence Unit country reports. A higher number means higher uncertainty and vice versa.
Source: Allianz Global Investors Global Economics & Strategy, Ahir/Bloom/Furceri (World Uncertainty Index), IMF, Yale Budget Lab (tariff rate), data as at 7 August 2025.
