Year-end market outlook: All eyes on policy responses

Diversified international portfolio can tap high potential in each market. By Kean Tan

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As we approach the end of 2025, the global economic outlook is characterised by slowing growth, with the US economy losing steam due to consumer fatigue and China continuing to struggle due to weak domestic demand.

In contrast, Europe sits in a sweet spot of growth, inflation and monetary policy, although in our view, the effective implementation of various fiscal initiatives will be critical.

The US economyis facing challenges, including softer job growth, the impact of tariffs, and policy uncertainty, which are weighing on consumer spending. US consumers are responsible for about 70% of US GDP growth.

This backdrop, together with the growing confidence that any tariff-induced inflation spike will remain transitory, will potentially allow the Federal Reserve to respond with several interest rate cuts into the year-end and first quarter of 2026. As the yield advantage shrinks, the US dollar would thus be likely to resume its downward trend again.

Although we are likely in the later stages of the current equity bull market,

We remain constructive on Chinese equities, as fundamentals such as profitability, shareholders’ returns, and liquidity conditions are improving.

we remain optimistic about the prospects for equities and believe investors should stay invested. While valuations are no longer cheap, market sentiment and investor positioning have yet to reach excessively optimistic levels.

As leadership differs across global markets, it is important to build an internationally diversified portfolio.