Global Equity Pulse: Navigating past the tariff risks

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In focus: Navigating past the tariff risks

Global equities appear to have successfully weathered US tariff impacts, with the third-quarter results season offering more evidence that earnings expectations have recovered to the level prevailing before US President Donald Trump’s “Liberation Day” tariff announcement in April. In our view, contributing factors such as production and cost restructuring—as well as pricing power—are helping companies manage the tariff headwinds better than initially thought. 

Amid a potentially improving market environment that also benefits from the tailwinds of monetary easing and a weak US dollar, we remain confident in our high-conviction holdings across sectors such as information technology and industrials. Mispricing opportunities in sectors such as health care and consumer staples are also on our radar. As always, our core principles of bottom-up stock selection and valuation discipline will anchor these investment considerations.

Investment outlook

While ambitious valuations and stretched technical market conditions call for continued diversification, the broader backdrop for US equities remains highly constructive, in our view. We are confident of the earnings outlook for our US holdings. Sectorially, we believe health care stock valuations look compelling relative to their earnings growth. In Asia Pacific (APAC), US trade deals with China and South Korea have further reduced the regional tariff overhang, but a prudent approach is necessary amid elevated valuations. We maintain our conviction on technology stocks but are expanding our search beyond the immediate AI beneficiaries. European equities are emerging from a period of underperformance with a more balanced and constructive backdrop. Valuations remain appealing while earnings resilience has improved. Opportunities we are looking at include luxury goods, banks, aerospace and defense companies.

In North America, we believe that while ambitious valuations and stretched technical market conditions call for continued diversification, the broader backdrop for US equities remains highly constructive. US growth has slowed but remains positive, in line with our base-case view. We are keeping an eye on any further deterioration in growth or signs of a possible recession.  

The Fed and other major central banks have cut rates in response to declining inflation, slowing growth and softening labor markets. The Fed’s focus has shifted from inflation to labor market risks, especially after recent payroll revisions and signs of employment weakness.

In Asia Pacific, a major relief to regional tariff woes came in recent days as the United States struck deals with China, South Korea and Malaysia to lower the levies on their exports to the US market. We will watch for further execution details, but the US-China deal is a welcomed de-escalation of the tensions between the two superpowers. For South Korea, a lower US duty on its automobile and auto-part exports, among other adjustments, is also good news for investors.     

In Europe, equities are emerging from a period of underperformance with a more balanced and constructive backdrop. Valuations remain appealing to us relative to both history and global peers, while earnings resilience has improved as input costs stabilize and order books in key industries recover. Many of the structural headwinds that previously weighed on sentiment, including fragmented fiscal responses and political uncertainty, have moderated.

Market review: October 2025

Global equities advanced further in October, with the MSCI ACWI benchmark generating positive US dollar returns on the back of strong gains in the information technology, utilities and health care sectors. In contrast, communication services, materials and real estate lagged, reflecting a shift toward higher-quality growth and defensives.

A second Fed interest-rate cut this year buoyed market performance, US-China trade tensions eased late in the month, and macro momentum in Europe firmed. Oil rallied on fresh sanctions against Russian producers, supporting energy shares and broader cyclicals. With the US government shutdown limiting the data flow during parts of the month, markets leaned on policy signals and earnings, which were generally supportive entering the month-end.