2025 Global Equity Outlook
Fourth Quarter
Key Takeaways
Developed Markets: Businesses are adapting to a world of higher tariffs, and for some, the effects may be less severe than initially feared.
Emerging Markets: Long-term trends support emerging markets (EM), although tariffs present challenges.
Developed Markets
Navigating Global Trade Shifts in 2025
Companies are adjusting to the changing trade environment, and while it’s too early to know how tariffs will impact individual companies, many firms may avoid unmanageable hits to their earnings.
The U.S. has announced new trade deals with several key partners, including the EU, Japan and South Korea. Most goods will now be subject to 15% tariffs. However, the U.S. will continue to impose higher tariffs on certain goods like steel and aluminum.
Gaining clarity about the size and scope of tariffs could help companies make important decisions about pricing, supply chains and capital expenditures.
Questions remain about tariffs' exact impact and implementation, especially for specific sectors and companies. To what degree will businesses absorb or pass along higher costs? And how will these changes influence demand?
Outcomes could vary. The automotive sector, for example, may fare better than expected, while tariffs might prove to be a tougher headwind for consumer goods. Select domestically focused businesses may benefit from a higher tariff environment if they don’t rely on global supply chains.
Big Tech Firms Press Forward with AI Investments
The largest tech firms remain committed to investments in artificial intelligence (AI), despite concerns earlier this year that they might dial back their spending.
Alphabet, Amazon, Meta and Microsoft — the “hyperscalers” rapidly building new data centers — all plan to increase their capital expenditures this year. Their CapEx, which tends to focus on AI spending, could rise by more than 50%, as shown in Figure 1.
According to the current forecast, their spending is expected to grow in 2026, but at a slower rate.
Figure 1 | Hyperscalers’ CapEx Grows Faster Than Other Companies
Spending on Capital Expenditures ($ Billions)
Data from 12/31/2023 – 8/31/2025. Source: FactSet, Company Reports. Estimates are as of 8/6/2025 and are subject to change. Hyperscalers: Amazon, Alphabet, Meta and Microsoft. The chart represents total CapEx (not only AI CapEx) for the four hyperscalers vs. the rest of the S&P 500. Forecasts are not a reliable indicator of future performance.
AI has started contributing to performance for these companies, particularly in terms of data center demand. The AI trend is also creating opportunities for other businesses exposed to the massive global expansion of data centers. This may include chipmakers, utilities, and construction and engineering firms, among others.
Growth Opportunities Exist Beyond the U.S.
In our view, Europe and Japan hold potential for investors seeking growth in developed economies outside the U.S.
In Europe, higher spending on defense and infrastructure could encourage growth for defense companies, design firms, cybersecurity consultancies and others in these fields. The Russia-Ukraine War is spurring governments in the region to rearm amid concerns about the state of Europe’s alliance with the U.S.
Meanwhile, Japan is proceeding with its national digitalization effort, which aims to upgrade its IT infrastructure and encourage the use of digital tools. This initiative could benefit a wide range of companies, including IT consultancies and cybersecurity companies. Other businesses, such as banks that expand their online services, may also enjoy productivity gains from digitalization.
Developed Markets Adjust to a Changing Market
We think companies will continue to adapt to new trade agreements, although there may be periods of episodic volatility.
In this environment, we believe investors should consider an active yet selective approach focused on identifying opportunities, especially those supported by sustainable growth drivers. These include AI adoption, national defense, and travel and tourism, among others.
Emerging Markets
Government Efforts Could Encourage Chinese Growth
China’s growth may moderate slightly in the third quarter, prompting additional government measures to boost demand. The Chinese government’s macro policy stance is accommodative but more targeted, and unleashing higher domestic demand continues to be a priority.
Policymakers are driving consolidation in overcompetitive industries such as paper, cement, steel, express logistics and the solar energy supply chain. This may support profitability while easing deflation and oversupply.
China’s continuing focus on high-tech manufacturing, AI and industrial modernization could further support economic growth.
The government may also undertake high-quality urban renewal projects, including utility infrastructure and public facilities upgrades. These efforts could benefit the country’s real estate sector.
China is still negotiating trade disagreements with the U.S., but the two nations have paused the worst of their threatened tariffs. Market sentiment surrounding U.S.-China relations notably improved after these extensions were announced.
Brazil and India Face Increased U.S. Tariffs
Two other major emerging markets face substantially higher U.S. tariffs, with a few exceptions.
The U.S. has imposed 50% tariffs on Brazilian goods with exemptions for several categories, including civil aircraft and energy products.1 Brazil’s diversified export base and resilient domestic consumption may buffer against short-term shocks.
Brazil’s central bank has ended rate hikes, which could open the door for stocks to perform well.
U.S. tariffs on India also jumped to 50%.2 The White House said part of the increase was designed to discourage India from buying Russian oil. Like Brazil, the tariffs on India include exemptions for certain goods, such as semiconductors.
Given the souring relationship between the U.S. and India, India’s Monetary Policy Committee may ease rates by 25 basis points in October.3
However, an incremental rate cut may not solve all the problems the Indian economy could face going forward, particularly those related to tariff risks. In the coming quarters, the government may have to adjust fiscal policy to support growth, employment and income.
Key Growth Drivers in Emerging Markets
We believe emerging markets present compelling investment opportunities supported by robust fundamentals, stabilizing U.S. trade policy and anticipated Federal Reserve rate cuts.
In our view, EM companies offer more attractive valuations and the prospect of higher earnings growth that could surpass global peers. Given the strong inverse relationship between EM equities and the dollar, a weaker U.S. dollar could also act as a growth driver.
Demographic trends, such as younger populations and increasing urbanization, support long-term growth, alongside ongoing reforms and policy changes.
Because of these and other factors, we see EM companies as a compelling opportunity for investors seeking growth and diversification. Stock selection remains critical for identifying EM companies that are likely better positioned to deliver accelerating, sustainable growth.
¹The White House, “Fact Sheet: President Donald J. Trump Addresses Threats to the United States from the Government of Brazil,” July 30, 2025.
²The White House, “Fact Sheet: President Donald J. Trump Addresses Threats to the United States by the Government of the Russian Federation,” August 6, 2025.
³Economic Times BFSI, “RBI May Cut Rate in October Policy as Inflation Forecast Drops Sharply,” August 7, 2025.
Explore Our Emerging Markets Capabilities
References to specific securities are for illustrative purposes only and are not intended as recommendations to purchase or sell securities. Opinions and estimates offered constitute our judgment and, along with other portfolio data, are subject to change without notice.
International investing involves special risks, such as political instability and currency fluctuations. Investing in emerging markets may accentuate these risks.
Investment return and principal value of security investments will fluctuate. The value at the time of redemption may be more or less than the original cost. Past performance is no guarantee of future results.
Historically, small- and/or mid-cap stocks have been more volatile than the stock of larger, more-established companies. Smaller companies may have limited resources, product lines and markets, and their securities may trade less frequently and in more limited volumes than the securities of larger companies.
Diversification does not assure a profit nor does it protect against loss of principal.
Generally, as interest rates rise, bond prices fall. The opposite is true when interest rates decline.
Past performance is no guarantee of future results. Investment returns will fluctuate and it is possible to lose money.
The opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments' portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.