Tariffs, Tech, and Tailwinds: A 2025 Market Midyear Check-In
We were pleased to host Mila Jankova, Investment Director at Capital Group, for a wide-ranging discussion on the markets, international investing, and global innovation. Here are the key themes from our conversation:
Tariffs Are Back in Focus
- Management teams are bracing for volatility but showing resilience.
- Some firms, like Inditex (Zara), are positioned well thanks to proximity sourcing.
- Companies have quietly restructured supply chains since the first Trump term.
- Capital Group uses four lenses to understand tariffs’ motivations and potential impacts: Funding, Decoupling, Rebalancing, Negotiating.
European Business Sentiment May Be Turning
- Germany has shifted from fiscal austerity and lifted defense spending caps.
- A shift toward more business-friendly regulation and fiscal expansion could boost growth.
- European equities still trade at much lower valuations than U.S. stocks.
International Stocks Are Having a Moment
- YTD, non-U.S. markets are far outpacing the S&P 500.
- Valuations outside the U.S. remain attractive.
- Global markets are broadening, with sectors like industrials and energy equipment poised to benefit.
AI as a Global Megatrend
- U.S. tech leads (NVIDIA, Broadcom). But global supply chains (e.g., TSMC) are critical players.
- Europe and China are innovating too — from DeepSeek to Ray-Ban’s AI-enhanced smart glasses.
- Healthcare may see major gains from AI in drug design and trial efficiency.
- Investors tend to overestimate the impact of technological shifts in the near term and underestimate the long-term impact.
- PC and Internet penetration is far beyond what most people expected at the dawn of those technologies.
Currency
- A weakening dollar has boosted international returns for U.S. investors.
- Capital Group considers currency risk mostly at the company level — where goods are made and revenue earned.
