Global investment market outlook: Q4 2025 trends & insights

Though we manage funds for the long term, here are our thoughts on markets as we look forward over the coming quarters.

Equity markets pushed higher in the third quarter of 2025. Global equity valuations, amid US market dominance, are relatively full, in our view. However, some lower-valued regions could see bouts of outperformance. We are continuing to monitor risks, including the potential impact of trade tariffs, market concentration and geopolitical conflicts. We believe in having a spread of global equity market exposure.

In fixed income, credit is looking less attractive amid tight spreads over government bonds. Credit does not have an obvious catalyst for outperformance, in our view. Despite possible inflationary risks posed by trade policies, further near-term rate cuts from the US Federal Reserve (Fed) are expected by the market. In our view, holding a diversified spread of government bonds and credit, in different geographies and with different characteristics, can continue to provide income-generation benefits.

The Bank of England (BoE) is faced with above-target inflation and lacklustre gross domestic product (GDP) growth. Inflation may still have some upside risk and is already running at a higher rate than many developed market peers. While the UK currently has muted earnings growth potential, market sentiment has improved.

The US Federal Reserve cut rates for the first time this year during the third quarter, and further cuts are expected in the final months of 2025. The impact of the country’s trade tariff policy has still to fully play out; however, the Fed has recently revised its GDP growth expectations slightly higher. US growth prospects remain superior to many other developed markets, but this appears priced in at present.

European valuation levels remain attractive but there are no immediate growth catalysts. The European Central Bank (ECB) did not cut rates during the quarter, and at present, inflation appears relatively well contained.

We believe in having a spread of global equity market exposure.

In Japan, monetary policy normalisation through interest rate increases remains on hold, with the last hike coming back in January 2025. The country has, however, seen continued economic improvements in many areas and its trade deal with the US could reduce uncertainty. Over the long-run, structural tailwinds should benefit the market.

US-dollar weakness and reduced trade uncertainty for some countries has helped sentiment. China’s equity market continued to rally during the third quarter. However, India, one of the largest emerging markets, was hit with high US trade tariffs. Overall, the long-term growth potential of emerging markets remains relatively solid, and valuations appear attractive, in our view.

The BoE and Fed cut interest rates during the third quarter. Growth and inflation uncertainty makes rate decisions difficult for central bank policymakers in many developed markets, but the market expects further Fed rate cuts this year. We continue to believe that the short end of the yield curve offers the best risk-return trade-off.

In credit, spreads over government bonds are narrow, which limits the potential for near-term outperformance, in our view.

In credit, spreads over government bonds are narrow, which limits the potential for near-term outperformance, in our view. Short-term volatility may, however, present credit opportunities.

Some emerging economies have exhibited fiscal pragmatism. However, we continue to monitor for idiosyncratic risks. The asset class could still benefit from any further US interest rate cuts or US-dollar weakness. We believe valuations in emerging market debt remain broadly attractive.