Global Equities in 2025: Are Markets Pricing in a Soft Landing

Noa Strijbos 07/01/2025

Published July 1, 2025

After a volatile 2024 marked by rate hikes, geopolitical unrest, and AI-driven exuberance, equity markets entered 2025 with optimism. But is the optimism justified, or is this a rally built on shaky assumptions?

Key Market Themes for 2025

  1. Soft Landing Narrative Gains Ground
    • The S&P 500 is up 14.2% YTD, led by tech and industrials.
    • Inflation in the U.S. is trending below 2.3%, while unemployment remains near a historical low of 3.9%.
    • Fed futures are pricing in two rate cuts by December 2025.
  2. Earnings Recovery in Question
    • Q1 earnings beat estimates, but margins are compressing.
    • Revenue growth in S&P 500 is only 3.4% YoY, with earnings per share rising 4.9%, largely due to buybacks.
    • Sectors like financials and consumer discretionary are warning of slower H2 growth.
  3. China and Emerging Markets Diverge
    • China’s Shanghai Composite is flat YTD; growth slowed to 4.6%, below government targets.
    • India’s Nifty 50 has outperformed, rising 18.6%, as foreign inflows surge post-election.
    • MSCI Emerging Markets Index is up 7.9%, led by Brazil and Indonesia.

Valuations: Still Room to Run or Fully Priced?

IndexForward P/E10-Year Avg P/E2025 YTD Return
S&P 50020.5x17.4x+14.2%
Nasdaq-10027.8x23.1x+18.1%
Euro Stoxx 5013.1x14.2x+9.7%
Nikkei 22518.3x16.5x+11.4%

⚠️ Insight: U.S. equities, especially tech, are trading at premiums not seen since late 2021, yet bond yields remain relatively high at 3.85% (10Y UST). The equity risk premium is at its tightest in a decade.

What Smart Money Is Doing

  • Hedge Funds are rotating into cyclical names and trimming megacap tech exposure.
  • Sovereign Wealth Funds are boosting stakes in European industrials and green energy.
  • Retail Investors are increasingly crowding into AI, semiconductors, and biotech ETFs.

Risks to Watch

Risk FactorProbabilityPotential Market Impact
U.S. Recession (mild)Medium-10% to -15% S&P
China SlowdownHighCommodities -20%
Oil Price ShockMediumInflation spike, Fed pause
Fed Policy ErrorLow-MediumVolatility surge

“Markets are betting on a Goldilocks scenario. But if inflation re-accelerates or job markets overheat, the Fed could be forced to slam the brakes harder than anticipated.”
— Natalie Huang, Macro Strategist at Zephyr Capital

Global Equity Dashboard – July 2025

Top Performers (YTD):

  • $NVDA: +62%
  • $TATASTEEL (India): +47%
  • $AMD: +41%
  • $SMCI: +38%
  • $META: +29%

Laggards (YTD):

  • $BABA: -12%
  • $DIS: -9%
  • $NIO: -19%
  • $GS: -7%
  • $NFLX: -5%

Sector Breakdown (S&P 500):

  • Tech: +19.5%
  • Industrials: +11.3%
  • Financials: +4.8%
  • Energy: +2.1%
  • Healthcare: +8.9%

Bottom Line

Markets may be rallying on hope — but hope isn’t a strategy. Investors should brace for higher volatility, diversify away from overcrowded trades, and remain nimble in the second half of the year.

Noa Strijbos

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