Winners and Losers: Nigel Green's mid-year global market outlook

News.com.au

10-07-2025

The first half of 2025 has delivered record highs in global equity markets—but that headline masks a far more nuanced and fragmented reality.
The MSCI All Country World Index has climbed nearly 10% year-to-date, reaching a record on July 4.
Yet underneath that broad measure lies a sharp divergence in regional performance, shaped not only by economics, but by politics, tariffs, policy resets and investor sentiment.
This wasn't a rally led by the usual suspects. Instead, we saw a reshuffling of the global investment order. Greece soared 60%. Poland and the Czech Republic posted gains of 56% and 52% respectively.
South Korea jumped more than 30%. Meanwhile, the US, despite new highs in the S&P 500 and Nasdaq, significantly lagged its global peers.
This is not a coincidence, it's a repricing of risk and opportunity. Investors are recalibrating their exposure based on a new set of priorities: fiscal support, geopolitical alignment, industrial competitiveness, and valuation opportunity.
Europe, often written off in recent years, has staged its most convincing equity comeback in more than a decade.
A coordinated pivot away from austerity, greater fiscal alignment, and a decisive shift in global capital away from US-heavy positioning created the right conditions. Strong bank earnings, revived tourism, and a surge in defense spending have added fuel.
Greece leads the way, a standout not only in returns but in structural momentum. Its banks have beaten expectations, tourism is roaring back, and early repayment of bailout loans has buoyed sentiment.
In Central and Eastern Europe, Poland and the Czech Republic benefited from industrial resilience and strong domestic demand, helping them shake off their status as second-tier markets. Germany, Spain and Italy are also punching well above recent years.
In contrast, the US story is more complicated. On paper, it looks robust – the S&P 500 is up roughly 7%, and tech behemoths continue to outperform. But peel back the layers and cracks emerge.
Market breadth is historically narrow, with gains concentrated in just a handful of mega-cap names. For investors, this spells fragility. A market that looks strong but lacks depth is inherently vulnerable to shocks.
Investor unease hasn't come out of nowhere. President Trump's aggressive tariff push in early 2025 and erratic economic communications rattled confidence.
Billions flowed out of US assets and into Europe and select emerging markets in search of relative stability and fiscal clarity. Unless the US sees broader participation across sectors and a calming of policy volatility, its dominance may continue to erode.
Asia, meanwhile, delivered a mixed picture, but there were bright spots. South Korea emerged as the region's standout performer. Despite US tariffs and domestic political disruption, the KOSPI gained more than 30%.
Surging global demand for shipbuilding and AI chips, along with the election of a reformist president promising governance reforms, have lifted sentiment and valuations.
China showed signs of life too, posting a year-to-date gain of over 17%. A stronger yuan and measured policy support helped restore some market confidence, but the recovery remains fragile.
Policymakers are being cautious, stimulus is limited, and structural challenges persist. This isn't a roaring comeback—but it's no longer stagnation either
Not all boats
Not every market is benefiting. Thailand declined 13%, dragged down by political uncertainty, weak tourism recovery, and export-sector exposure to tariffs.
Turkey remains in crisis mode, with capital flight, inflation, and a lira down 13% against the dollar. These markets serve as a reminder: global capital is increasingly discriminating, and missteps are punished harshly.
So where does this leave investors heading into the second half of 2025?
Opportunities remain, but they are unevenly distributed. Europe still offers value, particularly in small caps and financials. But signs of earnings pressure are building. In the US, tech will remain central, but until broader sector participation emerges, upside looks constrained.
South Korea continues to look attractive, especially with reform tailwinds. China is the wild card: if Beijing shifts toward more aggressive stimulus, markets could surprise on the upside.
Crucially, central banks will again play a defining role. The European Central Bank has already cut rates. The Federal Reserve is widely expected to follow.
Liquidity is returning to the system but it will not be allocated uniformly. Markets will reward alignment with fiscal expansion and penalise indecision.
Selectivity is no longer optional. This is not a passive environment. Investors need to be disciplined, data-driven, and politically attuned.
Defence, AI technology, and financials with domestic policy tailwinds are the sectors we are monitoring most closely.
We should also brace for potential reversals. The capital rotation out of the US earlier this year could partially unwind if confidence rebounds. Europe's momentum could be derailed by fiscal tensions or unexpected elections. China could under deliver, or overheat.
Emerging markets face ongoing tariff volatility, which could whipsaw sentiment.
The second half of 2025 will not be a simple continuation of the first. Global markets are no longer moving in sync; they are reflecting a world where politics, policy, and power dynamics are in flux.
This fragmentation brings new risks – but also substantial opportunity for those willing to act with boldness and precision.
The traditional playbook no longer applies. We are in an environment shaped not just by economic data, but by tariff structures, policy pivots, and geopolitical recalibration.
Those who treat this as noise risk falling behind. Those who treat it as signal may find themselves ahead of the curve.
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Nigel Green, is the group CEO and founder of deVere Group, an independent global financial consultancy.