季度經濟展望 (只提供英文版)

Key takeaways

• Tariffs have raised risks for cyclical outcomes encompassing a range of economic and financial market indicators, including growth, inflation and interest rates. Fiscal policy across a range of countries, including the main developed markets, remains a key structural concern.
• We maintain our expectation of US-dollar (USD) weakening over the medium term, with current US policy likely to lead to portfolio shifts that reinforce our baseline expectations.
• Though risks have risen for emerging markets (EMs), we remain constructive on select countries within the asset class. Globalization is still proceeding, though the shape of it is changing as new trade agreements are formed, and a number of EMs are well-placed here. We also remain constructive on select developed markets.

Economic and market prospects

Global growth prospects have weakened in the face of US tariff policy, but thus far we assign a lower probability to a recessionary outcome. Growth prospects in Europe have brightened on the “ReArm Europe” plan, while the European Central Bank (ECB) has reduced rates significantly, and some more positive economic data have been recorded recently.

US growth is unlikely to see a significant boost from the budget. Estimates by various non-partisan organizations¹ indicate little significant effect on growth from the fiscal expansion. The reasons for this include that some tax cuts extend previous ones that were due to expire rather than representing new cuts and that the measures included some significant expenditure cuts.

The International Monetary Fund (IMF) released its July World Economic Outlook (WEO). Global growth has been revised slightly higher compared to the April WEO and is expected to expand by 3.0% in 2025 and 3.1% in 2026.

Inflation risks have risen around tariffs, in turn affecting the path of monetary policy in various countries. A number of central banks around the world have highlighted tariff uncertainty as clouding the interest-rate outlook, and some have become more cautious on policy as they wait for data to judge tariff effects on inflation.

We believe the USD remains overvalued against a range of currencies, despite the depreciation seen so far this cycle.

Strategy and portfolio positioning

Globalization is still proceeding, but it is taking different forms as newer alliances are strengthened, particularly between EMs and between non-US developed nations and EMs.

The tariff and policy outlook emanating from the United States somewhat dampens generally positive conditions for EMs. Sounder policies and reforms in a number of EMs have led to improved economic fundamentals, while we also expect various EMs to benefit from reshoring initiatives.

Within the Asia-Pacific region, where we have our largest regional exposure, we focus on countries with positive fundamentals and undervalued currencies, as well as those we expect to be more insulated from tariff effects.

In Latin America, we favor countries with prudent macroeconomic policies, relatively high yields and undervalued currencies. In this region, the independence of central banks in select countries and their resultant proactive monetary policy is a key strength, in our view.

We also see opportunities in select African and European countries, as well as in frontier markets in Asia.

We have shifted some of our developed market duration exposure. We extended both currency and duration exposure in the Euro area, reflecting a more constructive economic view due to the expected growth boost from defense and infrastructure spending, as well as an expected positive effect on the currency as pension funds move assets back home.

Overall, in local-currency positions, we favor select countries in both developed markets and EMs where we see value in their currencies, bonds or both.

Given improving fundamentals and policy responses in some EMs and frontier markets, we have expanded our holdings in select hard-currency-denominated sovereign credit.

In all cases, we remain highly selective at the sovereign level, given significant variations in economic fundamentals and policy responses.