Midyear Outlook 2025: A Landscape of Uncertainty and Opportunity for Long-Term Investors
- Metta Associates
- 26 minutes ago
- 6 min read
Policy shocks and market swings defined the first six months of the year. A new round of “America-first” levies pushed the average U.S. tariff rate up to 15.8 %, the highest since the 1930s¹. Equities whipsawed: the S&P 500® dropped 18.7 % from January to April, then rebounded 17.9 %; meanwhile, the MSCI ACWI ex USA advanced 18.5 % YTD versus the S&P’s 5.8% gain². Bond yields reset higher as the U.S. 10-year traded between 4.1 – 4.9 %, finishing June near 4.5%³. Gold, lifted by persistent inflation worries and emerging-market central-bank demand, hit a record US $2 450/oz, up 22.9 % YTD⁴.
How this Outlook Was Built – To navigate such volatility, we reviewed mid-year outlooks from global banks, asset managers, and independent research houses, then merged their views with our own analysis. The result is a concise synthesis of how shifting macro forces, valuations, and policy paths may shape risks and opportunities in the second half of 2025—translated into clear, long-term guidance for goal-aligned portfolios.
Macro Outlook
Global forecasts have been revised lower almost every month this year. The IMF now expects 2025 world GDP to expand just 2.6 %, down from 2.8 % in March, while global trade volume growth has been cut to 1.9 %.5 In the United States, tariff-driven price pressures and slowing demand point to a “stagflation‐lite” mix of 1 % real growth, 3.5 – 4 % core inflation, and unemployment edging toward 5 % by December.6 Europe is stabilising but still subdued: Eurozone activity is tracking 0.7 % for 2025 with headline CPI drifting below 2 % as the ECB begins a slow-walk easing cycle.7 By contrast, China’s policy toolkit has produced a “disinflationary boom”—Q1 real GDP grew 4.8 % y/y while CPI stayed below 1 %, giving Beijing room for targeted stimulus even as export demand softens.8
The net result is a two-speed world: stagflation risk at the centre of developed markets, disinflationary momentum in parts of Asia, and an overall deceleration in headline growth. Policy dispersion is widening— the Fed is expected to end 2025 with its target rate near 4 %, the ECB near 1.75 %, while the PBoC trims selectively. Major houses (Goldman, JPMorgan, Vanguard) flag persistent volatility as consensus numbers continue to slide: every 0.1 pp downgrade to U.S. growth this year has coincided with a 15–20 bp swing in 10-year Treasury yields and a 3 – 5 % move in global equities.
Against this backdrop, risk assets are still favoured over duration. Higher nominal growth outside the U.S., fiscal impulse in Europe, and China’s low-inflation expansion all support mid-single-digit earnings growth for MSCI ACWI over the next 12 months.9 Valuations have reset in many ex-U.S. markets, and global policy easing should cap real yields, tilting the probability-weighted outlook toward better equity returns relative to bonds, albeit with wider price ranges than in the 2010s.
Equities
Global stocks have steadied after an early‐year shake-out: MSCI ACWI ex USA is up 14.9 % YTD, eclipsing the S&P 500’s 1.5 % gain as of 23 June.10 Goldman Sachs, JPMorgan, BlackRock, Vanguard, Morgan Stanley, and Fidelity all note a modest leadership shift from U.S. mega-caps toward broader international markets for the rest of 2025.
Europe leads developed regions, with MSCI Europe up 13.2 % YTD, buoyed by fiscal stimulus and cheaper energy, while Japan has returned 18.1 % on governance reform and a weak yen.11 ASEAN equities show mid-single-digit gains on supply-chain re-shoring, whereas China is roughly flat amid policy uncertainty.12
Consensus expects MSCI ACWI earnings to grow ~5 % over the next 12 months, with the U.S. at 7 % and Europe near 6 %.13 Valuations reflect the divide: the S&P 500 trades at 21× forward earnings, versus 13× for MSCI Europe and 12× for MSCI EM, creating scope for mean reversion if growth forecasts stabilise.14 Together, the earnings outlook and valuation spread underpin the view that non-U.S. equities currently offer the more attractive risk-adjusted runway into 2026.
Fixed Income
The U.S. 10-year Treasury now yields about 4.5 %—more than three percentage points above its 2010-19 average—while investment-grade corporates offer near 5.7 %.15 Short-term bills hover around 5 %, yet most forecasters see better risk-reward in the three-to-seven-year segment of the curve. Wells Fargo Investment Institute and HSBC Global Private Banking both stress a “quality first” approach, adding selectively to intermediate-maturity investment-grade bonds.
Morgan Stanley also favours global investment-grade debt—placing particular weight on U.S. Treasuries—and advises scaling back high-yield bonds and leveraged loans, where spreads look thin relative to rising default risk. J.P. Morgan positions core high-quality bonds as the portfolio’s shock absorber should growth falter, noting that coupons above 5 % can still meet return targets even if rates simply hold steady. Across these houses, the shared view is that today’s most attractive combination of income and stability sits at the upper end of the credit spectrum, not in lower-quality spread products.
Commodities
Gold is 2025’s standout: it touched US $2,450/oz and is up 28 % YTD16. Fidelity, J.P. Morgan, and HSBC each highlight the metal as a resilient hedge against dollar weakness, inflation, and geopolitical risk17 18 20, citing sustained central-bank demand—official purchases have exceeded 1,000 t per year since 202219 —and renewed retail buying in China.
J.P. Morgan’s data show the overall commodity complex delivering –0.7 % in 202418, and most outlooks expect continued two-way volatility as global growth cools and policy uncertainty lingers. While gold still deserves a place as a portfolio stabiliser, diversified commodity baskets remain speculative: price swings linked to politics, currency moves, and trade frictions can lift or sink returns quickly, demanding careful sizing and selectivity.
Key Takeaways:
Financial Foundation First: Market volatility—with equity drawdowns of 18.7% and Treasury yield swings between 4.1-4.9%—reinforces the critical importance of strong financial fundamentals. Maintain adequate emergency reserves in high-yield savings accounts and commit to systematic investing through dollar-cost averaging. Research from Vanguard and Goldman Sachs confirms that disciplined savers who avoid market timing and maintain accessible cash reserves significantly outperform those who chase market movements or liquidate investments during stress periods.
Embrace Global Diversification: The investment landscape is fundamentally shifting away from U.S. market dominance. Reduce portfolio concentration in U.S. assets while strategically increasing allocations to European and emerging markets across equities, bonds, and alternatives. State Street and T. Rowe Price identify this geographic rebalancing as essential for capturing value in a multipolar world where growth opportunities are increasingly distributed globally.
Capitalize on Market Inefficiencies: Current volatility and policy uncertainty create significant opportunities for skilled active management. Focus on tactical adjustments within a strategic long-term framework, taking advantage of pricing dislocations while maintaining portfolio discipline. Leading asset managers including Apollo, Amundi, Blackstone, and BNY Mellon emphasize that today's market fragmentation rewards investors who can identify mispriced assets and act decisively while others remain paralyzed by headline risks.
¹ U.S. International Trade Commission, Tariff Schedule Update, Jun 2025.
² Bloomberg Finance L.P., MSCI & S&P total-return data, 2 Jan – 23 Jun 2025.
³ U.S. Treasury, Daily Yield Curve Rates, Q1 – Q2 2025.
⁴ World Gold Council, Gold Market Commentary, 26 Jun 2025.
5 IMF World Economic Outlook Update, June 2025
6 Bloomberg Consensus Economics Survey, 21 June 2025
7 ECB Staff Projections, June 2025
8 National Bureau of Statistics of China, Q1 2025 release
9 MSCI / FactSet aggregate earnings estimates, 24 June 2025
10 Bloomberg, MSCI & S&P total-return data, 23 Jun 2025.
11 MSCI Europe Net TR; Nikkei 225 TR, 23 Jun 2025.
12 Bloomberg ASEAN-5 Index; CSI 300 TR, YTD 2025.
13 FactSet Aggregates, Forward EPS Growth, 24 Jun 2025.
14 Refinitiv Datastream, Forward P/E multiples, 24 Jun 2025.
15 Bloomberg U.S. Treasury and Corporate Index yields, 24 Jun 2025.
16 Bloomberg, Gold Spot Price, 23 Jun 2025
17 Fidelity Bond & Gold Desk, Mid-Year Market Update, Jun 2025
18 J.P. Morgan Global Commodities Outlook, Jun 2025
19 World Gold Council, “Central Bank Gold Demand,” May 2025
20 HSBC Global Private Banking Mid-Year Outlook, Jun 2025
Metta Associates's Strategic Reflection
While investors paralyzed by trade wars and geopolitical uncertainty often retreat to familiar territories, missing transformational opportunities, Metta Associates clients experience a distinctly different reality.
At Metta Associates, we focus on disciplined long-term financial planning through globally diversified, multi-asset strategies that emphasize structural value regardless of market turbulence. This approach allows our clients to capitalize on the fragmentation of traditional markets by positioning in undervalued European equities, emerging market opportunities, and alternative investments that will yield exceptional returns when global rebalancing completes.
The current landscape now offers extraordinary prospects despite widespread uncertainty, with significant potential in international diversification and active portfolio management. Our value-driven strategy identifies these promising shifts while positioning investments for the post-US dominance era. With our guidance that instills disciplined "time in the market" principles and risk management framework tested against various global scenarios, we help you navigate this structural transformation with confidence, ensuring your financial future thrives where others see only disruption.
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Disclaimer
This content is intended for general informational purposes only and does not constitute investment advice, a recommendation, or an offer to buy or sell any financial instruments. It does not consider your specific investment objectives, financial situation, or needs. You are encouraged to consult a licensed financial advisor before making any financial decisions.
The information presented is based on sources believed to be reliable; however, its accuracy or completeness cannot be guaranteed. This material does not represent a forecast and should not be interpreted as a guarantee of future outcomes. It has been prepared with care and objectivity to support long-term, planning-focused financial decisions.
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