As we approach the end of summer, here are ten global market trends that are currently defining the world's economy and investor portfolios.
- The broadening of equity market leadership
For a long time, equity market growth has been concentrated into handful of mega-cap technology companies. One of the most important developments of recent months has been the move away from this exceptionally narrow market.
Other sectors such as financials, industrials, defence businesses, power infrastructure providers, and commodity-linked companies are increasingly contributing to returns.
A broader market is generally healthier and may extend the longevity of the bull market the world is currently in.
- Artificial intelligence is entering a new phase
While investors interested in AI initially focused on semiconductors, hyperscalers and data centres, their attention is now turning from AI infrastructure towards those monetising AI and driving productivity gains across the wider economy.
Financial services, healthcare, manufacturing, and professional services could be among the biggest beneficiaries over the next decade.
- The return of the bond term premium
‘Term premium’ is the extra yield that bond investors demand in return for investing in longer-dated bonds instead of those with a shorter term.
Larger fiscal deficits, ageing populations, defence spending and reduced central-bank balance sheets are all contributing to rising term premiums - a major theme that remains underappreciated by many investors.
Policy rates may move lower over time, but long-dated bond yields could remain structurally higher than during the post-GFC period.
- Bonds are attractive again, but not all bonds
While fixed income once again offers meaningful income and diversification, for the reasons outlined above, the most attractive opportunities may lie in short and intermediate maturities rather than longer duration calls.
- The resilience of the global economy
Recession forecasts have repeatedly proven premature. The US economy in particular remains remarkably resilient, supported by strong private-sector balance sheets, fiscal support, and AI-related investment.
The key question for investors is not whether risks exist, but whether they are sufficient to overwhelm a still-resilient global economy.
- China's two-speed economy
China increasingly looks like two economies: export manufacturers and AI-related industrial businesses continue to perform well. On the other hand, domestic consumption, property, and consumer confidence remain weak.
This makes broad Chinese equity calls difficult and increases the importance of security and sector selection.
- The rise of industrial policy
Markets are being influenced more by governments and geopolitics than at any point in recent decades. Defence spending, energy security, reshoring, and strategic technology investment are becoming increasingly important drivers of returns, marking a major shift in the investment landscape.
- Gold's resurgence
Gold's strength is not simply as an inflation hedge – investors are using gold as a useful guard against policy mistakes and geopolitical instability. The price of gold has rebounded, reflecting concerns around fiscal sustainability and currency debasement.
- The changing Federal Reserve
Kevin Warsh's review of the Federal Reserve (Fed) could represent the most significant reassessment of monetary policy since the Bernanke era.
Less forward guidance, greater emphasis on inflation control and more scepticism towards balance-sheet intervention could fundamentally change how markets interact with the Fed.
- Why active management may become more valuable
The post-GFC environment was dominated by falling rates, globalisation, and abundant liquidity. The world is now characterised by greater inflation volatility, geopolitical tension, industrial policy, and technological disruption.
A more complex environment may create greater opportunities for active asset allocation and security selection.
The value of securities and the income from them can fall as well as rise. Past performance should not be seen as an indicator of future returns. All views expressed are those of the author and should not be considered a recommendation or solicitation to buy or sell any products or securities.
