
Getting a grip on uncertainty
Investment themes
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01
Investing in the here and now
Immutable economic laws limit how fast global trade and capital markets can evolve, providing more certainty about the near-term macro outlook than the long term. That keeps us pro risk and overweight U.S. equities.
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02
Taking risk with no macro anchor
We believe this environment of transformation is better than the prior decade for achieving above-benchmark returns, or alpha. Yet the volatile macro environment injects risk into portfolios that needs to be actively managed or neutralized.
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03
Finding anchors in mega forces
Even with the loss of long-term macro anchors, we believe mega forces are durable return drivers. Yet mega forces don’t map into broad return drivers, and we get granular to track their evolution across and within asset classes. We like the AI theme.
Read details of our 2025 midyear outlook:
Leaning on themes
We had previously laid out scenarios to help guide us on a tactical investing horizon. Yet we think macro outcomes are likely more contained in the near term than in the long term. For that reason, we are now using scenarios to guide how we speak to a medium-term outlook in strategic allocations of five years and beyond. Mega forces are a key driver of asset allocation across tactical and strategic horizons – and highlight how the opportunity set is becoming more thematic in nature.
Big calls
Our highest conviction views on tactical (6-12 month) and strategic (long-term) horizons, July 2025
Reasons | ||
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Tactical | Reasons | |
U.S. equities | ReasonsPolicy uncertainty and supply disruptions are weighing on near-term growth, raising the risk of a contraction. Yet we think U.S. equities will regain global leadership as the AI theme keeps providing near-term earnings support and could drive productivity in the long term. | |
Using FX to enhance income | ReasonsFX hedging is now a source of income, especially when hedging euro area bonds back into U.S. dollars. For example, 10-year government bonds in France or Spain offer more income when currency hedged than U.S. investment grade credit, with yields above 5%. | |
Seeking alpha sources | ReasonsWe identify sources of risk taking to be more deliberate in earning alpha. These include the potential impact of regulatory changes on corporate earnings, spotting crowded positions where markets could snap back and opportunities to provide liquidity during periods of stress. | |
Strategic | Reasons | |
Infrastructure equity and private credit | ReasonsWe see opportunities in infrastructure equity due to attractive relative valuations and mega forces. We think private credit will earn lending share as banks retreat – and at attractive returns. | |
Fixed income granularity | ReasonsWe prefer short-term inflation-linked bonds over nominal developed market (DM) government bonds, as U.S. tariffs could push up inflation. Within DM government bonds, we favor UK gilts over other regions. | |
Equity granularity | ReasonsWe favor emerging over developed markets yet get selective in both. Emerging markets (EM) at the cross current of mega forces – like India – offer opportunities. In DM, we like Japan as the return of inflation and corporate reforms brighten the outlook. | |
Comments | ||
Note: Views are from a U.S. dollar perspective, July 2025. This material represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding any particular funds, strategy or security. |
Tactical granular views
Six- to 12-month tactical views on selected assets vs. broad global asset classes by level of conviction, July 2025
The table below reflects our views on a tactical horizon and, importantly, leaves aside the opportunity for alpha, or the potential to generate above-benchmark returns – especially at times of heightened volatility.
Euro-denominated tactical granular views
Six to 12-month tactical views on selected assets vs. broad global asset classes by level of conviction, July 2025
Asset | Tactical view | Commentary | ||
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AssetEquities | Tactical view | Commentary | ||
Asset Europe ex UK | Tactical view |
CommentaryWe are neutral. Greater unity and a pro-growth agenda across Europe could boost activity, yet we are watching how the bloc tackles its structural challenges before turning more optimistic. We note opportunities in financials and industries tied to defense and infrastructure spending. | ||
AssetGermany | Tactical view |
CommentaryWe are neutral. Valuations and earnings growth are supportive relative to peers, especially as ECB rate cuts ease financing conditions. Prolonged uncertainty about potential tariffs and fading euphoria over China’s stimulus could dent sentiment. | ||
AssetFrance | Tactical view |
CommentaryWe are neutral. Ongoing political uncertainty could weigh on business conditions for French companies. Yet only a small share of the revenues and operations of major French firms is tied to domestic activity. | ||
AssetItaly | Tactical view |
CommentaryWe are neutral. Valuations are supportive relative to peers. Yet past growth and earnings outperformance largely stemmed from significant fiscal stimulus in 2022-2023, which is unlikely to be sustained in the coming years. | ||
Past performance is not a reliable indicator of current or future results. It is not possible to invest directly in an index. Note: Views are from a euro perspective, July 2025. This material represents an assessment of the market environment at a specific time and is not intended to be a forecast or guarantee of future results. This information should not be relied upon as investment advice regarding any particular fund, strategy or security. |
Assessing the impact of escalating trade tensions

Past performance is not a reliable indicator of current or future results. It is not possible to invest directly in an index. Note: Views are from a U.S. dollar perspective. This material represents an assessment of the market environment at a specific time and is not intended to be a forecast or guarantee of future results. This information should not be relied upon as investment advice regarding any particular fund, strategy or security.