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03 Jul 2025
3 min read

Midyear global outlook: Gravity defied – for now

Even though many markets have recovered poise since the recent volatility spike, they remain vulnerable to further shocks and crucial long-term questions for investors persist.

MYO-H2-2025 cover

The following is an excerpt from our midyear global outlook

Of the various challenges involved in writing an outlook, two of the most prominent are: the possibility of having nothing new to say; and the risk of contradicting what you said only a few months earlier. 

Unfortunately for investor nerves, the events of the first half of 2025 have given us plenty on which to opine. And we reiterate our core view that humility is more important than ever when navigating the challenging investment landscape this year, as markets clearly were mispricing a host of risks ahead of the tariffs-related surge in volatility

We have titled this midyear outlook ‘Gravity defied – for now’ because risk assets have recovered since the precipitous declines of early April, which rival some of the worst collapses in living memory. Yet even with the S&P 500 trading (at the time of writing) above its level at the start of the second Trump administration, and many other markets in positive territory for the year, crucial long-term questions for investors linger. 

In this outlook, to which teams from across L&G’s Asset Management business have contributed, we address some of the most urgent and salient issues and questions for our clients across both public and private markets. These include: 

  • Have we reached the end of ‘US exceptionalism’?
  • Is it true that there is no alternative (TINA) to US dollar assets?
  • How to tackle concentration risk and market volatility
  • The enduring strength of US Treasuries, the outlook for cash rates and how to navigate macro uncertainty across public and private markets
  • How pension proposals could boost investment into private markets, bolstering economic activity and sterling assets
  • The implications for emerging markets of evolving US-China relations 

You will come across the word ‘diversification’* frequently over the coming pages. That’s because we believe the concept – whether at a stock, issuer, sector, geographic or asset class level – is a key instrument in the investor toolkit for dealing with market episodes such as the one we recently experienced. And for achieving long-term investment outcomes. 

A multi-polar world 

As we enter the second half of 2025, further developments in government policy and geopolitics will shape the trajectory of growth, inflation and monetary policy, the key drivers of markets – alongside US dollar dynamics and the mounting burden of sovereign debt influencing investor perceptions of longer term fiscal and budget sustainability. 

But the decisive shift away from the liberal, free-trading, post-war order towards a multi-polar world with a more complex international landscape will almost certainly have far greater implications over the coming years. 

The tension in the Middle East, meanwhile, adds yet another layer of complexity and uncertainty to an increasingly complex global geopolitical landscape. 

With foundations stretching back to 1836, at L&G we will face that future with humility, as we continue to seek opportunities and manage risk on behalf our clients. 

Our ambition 

Diversification also speaks to how we are seeking to fulfil our ambition as a business: to be a leading global investor, innovating to solve complex challenges for our clients, using the power of L&G. 

To better meet our clients’ needs in a rapidly changing industry and macro landscape, we plan to build where we have existing expertise; partner where we have aligned purpose; and buy where we identify high-quality capabilities. 

For example, the US, continental Europe and select regions within APAC represent key strategic growth areas for our private markets platform. They offer diversification for clients and expand our investment opportunity set in a number of subsectors that appear well positioned to benefit from favourable structural trends. 

We will showcase over the coming months each of our capabilities in turn to highlight how they can play important roles in portfolios, at different points across our clients’ lifelong investment journeys.

This article is an excerpt from our midyear global outlook

*It should be noted that diversification is no guarantee against a loss in a declining market.

Active fixed income Private Markets Inflation Listed alternatives Politics Sovereign debt United Kingdom United States US Dollar Active strategies Index fixed income Index equity Liquidity cash Asset allocation Multi-asset Central banks Emerging Market Debt (Local) Interest rates Alternative investments Corporate debt Emerging Market Debt (Hard) Emerging Markets Factor Based Investing Government bonds
Sonja Laud

Sonja Laud

Chief Investment Officer, Asset Management, L&G

Sonja Laud is Global Chief Investment Officer (CIO) of L&G’s Asset Management division and a member of the Executive team. She leads the firm’s entire Investment, Responsible Investment and... 

More about Sonja
Bill Hughes

Bill Hughes

Global Head of Real Assets

Bill joined Legal and General in 2007 and is responsible for transforming its UK property fund management business into a global real assets platform. Operating…

More about Bill

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