Global Market Outlook H2 2025: Positioning for a weak dollar
After a turbulent start to the year, we see global trade tensions easing significantly following the US-China truce. Meanwhile, continued disinflation, especially in emerging markets, is setting the stage for further central bank rate cuts in the second half of the year.
We are Overweight global equities. Policy easing worldwide, strong chances of a US soft landing and a weaker USD are supportive of risky assets. We favour diversified global equity exposure, within which we upgrade Asia ex-Japan equities to Overweight.
We expect the USD to weaken, benefitting the EUR, JPY and GBP. History shows USD weakness is positive for equities and outperformance of non-US equities. We favour 5-7-year maturities in USD bonds and upgrade emerging market local currency bonds to Overweight.
Renewed tariffs, inflation and weaker economic data are key risks. Gold and Alternative Strategies are attractive diversifiers that can also help mitigate temporary volatility.
Opportunities: Within equities, we see opportunities to invest in US software and major banks; Korea large-caps, China non-financial high-dividend state-owned entities and Hang Seng Technology Index; and Europe banks and industrials. Within bonds, consider adding to your portfolio Asia local currency bonds, UK Gilts (FX-unhedged) and US Treasury Inflation-Protected Securities (TIPS).
