Global Equity Pulse

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In focus: Navigating the post-“Liberation Day” uncertainties

Amid persistent US tariff uncertainty and potential earnings growth slowdown, Templeton Global Equity Group (TGEG) aims to stay selectively invested with a prudent approach that focuses on geographical diversification and sectors less vulnerable to tariffs.

Harnessing the opportunities in the European and Japanese markets is part of our priority in the current climate. In stock selection terms, we prefer companies with stronger domestic revenue exposure and lower vulnerability to cross-border supply chain disruptions, among other ideas. As always, valuation discipline and bottom-up fundamental research will continue to anchor our decision-making process.

Investment outlook

Investor sentiment toward the Trump presidency has turned increasingly skeptical due to its unpredictable nature, a trend that is likely to continue weighing on US equities in the coming quarters. While the US market may still perform well, its major outperformance over the rest of the world could be over. We see mispricing opportunities to revisit some technology stocks following corrections but remain cautious on US businesses reliant on cross-border trade and complex global supply chains. In Asia, various forecasters anticipate economic and earnings growth to slow, but our bottom-up approach should help us identify resilient companies for portfolio enhancement. That entails maintaining our “Domestic China–Global China” positioning in markets in mainland China and Hong Kong, given the tariff overhang. We are more optimistic about Europe’s economic outlook and growth drivers. Sectors such as industrials and materials may benefit from the potential cyclical recovery. Small and mid-cap companies continue to look attractive against this backdrop.

In North America, the investment environment has changed dramatically over the past few months. Developments since the start of the year lead us to believe that it is reasonably likely that the extraordinary outperformance of US stocks versus the rest of the world since the global financial crisis could be over. This does not mean US stocks won’t perform well going forward, but it suggests that other regions’ equity markets may begin to match or even exceed US stock returns.

In Asia, equities saw some recovery in the second half of April, indicating market hopes around potential softening of Trump’s tariff threats and US-China trade tensions. Amid the ebb and flow of market narratives and sentiment, we maintain our view that the policy and economic outlook remains highly unpredictable. An economic slowdown is still widely expected, with the International Monetary Fund projecting growth in emerging and developing Asia to moderate to 4.5% in 2025 from 5.3% in 2024; China’s 2025 growth may also weaken to 4%, down from 5% in 2024.¹ In tandem, consensus earnings forecasts are being downgraded. The MSCI AC Asia Pacific ex-Japan Index may see earnings growth of 10% in 2025, versus 21% in 2024, while earnings growth in Japan may slow from 4% to 2%.²

In Europe, ongoing volatility is keeping investors focused on short-term challenges and US policy implications. Meanwhile, stubbornly high interest rates and falling energy prices remained significant in recent months. Most notably, the US presidential election has reversed policy tailwinds as the US administration has taken an aggressive approach to international trade, having knock-on effects worldwide.

Market review: April 2025

Global financial markets gained but experienced significant volatility in April. As measured by MSCI indexes in US-dollar terms, developed market equities underperformed emerging market equities. In terms of investment style, global growth stocks substantially outperformed global value stocks.

Investor anxiety about the impact of US trade policy weighed on stocks, bonds and currencies. The month started with US President Donald Trump’s announcement of “reciprocal” tariffs that were more sweeping and severe than many had expected, driving stocks substantially lower. However, stocks recouped most of their losses after Trump announced a 90-day pause on the implementation of such tariffs on imported goods from most countries and removed tariffs on certain electronic products. US-China trade tensions eased somewhat after the US administration adopted a softer tone, further supporting stocks. On the economic front, early reports for April indicated that tariff concerns weighed on manufacturing activity across many regions, while services activity continued to grow in several regions.