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By  Yoram Lustig, CFA®
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Global Asset Allocation: The View From the UK

Discover the latest global market themes

February 2025

Outlook: New World Order

  • We have a more cautious view as broadly resilient global growth and receding inflation trends could be at risk to increased policy uncertainty, particularly around trade threats. 
  • US growth exceptionalism leaves it better positioned should trade disputes escalate, with other major economies, particularly Europe and China, more exposed with growth already tepid.
  • Central bank divergence could widen on impacts of trade, with the Fed in a position to wait on impacts, whilst other central banks, including the Bank of England (BoE), the European Central Bank (ECB) and the Bank of Canada, advance easing as risk tilts towards slower growth.
  • Key risks to global markets include elevated threat of trade wars impacting growth and reaccelerating inflation, central bank missteps and geopolitical tensions.

Themes Driving Positioning

Big Bet!

What do digital advertising, online retail, electric vehicles and software have in common? Seemingly not a lot, other than a combined USD 20 trillion. The ‘Mag 7’, as they are known, are a heterogenous group of companies that have dominated global equity markets. Their combined market cap is now multiple times larger than other parts of the market and any other country outside the US. Whilst eye‑catching, their profitability has also been unprecedented in helping justify valuations. However, the recent news around DeepSeek, a Chinese artificial intelligence (AI) start‑up, highlighted a common thread across this otherwise disparate group: billions in capex spending. Their enormous bet on AI technology to sustain their dominance will be increasingly scrutinised by investors looking for assurance these big bets pay off. Against this backdrop, we favour better‑priced value stocks that should benefit from a broadening market and improving earnings.

Deal or No Deal?

As promised, President Donald Trump acted swiftly on using tariffs as a negotiating tool to draw counterparties to the table. The tariffs have been introduced largely on the premise of creating fairer trade policies and gaining border security protections. For the most part, the more aggressive stance has worked with trade partners acting quickly to make a deal or at least delay tariffs. The stakes are high for those targeted whose economies rely more heavily on trade. And whilst the US comes at these on a stronger economic footing and with less trade vulnerability, it will not be immune to potential consequences if this turns into a prolonged trade war, particularly with inflation at higher levels this time around. With the increased uncertainty, we moderated our equity exposure during the last few months as risk is increasingly tilted to the downside at current valuations.

 

For a region-by-region overview, see the full report (PDF).

Important Information

This material is being furnished for general informational and/or marketing purposes only. The material does not constitute or undertake to give advice of any nature, including fiduciary investment advice. Prospective investors are recommended to seek independent legal, financial and tax advice before making any investment decision. T. Rowe Price group of companies including T. Rowe Price Associates, Inc. and/or its affiliates receive revenue from T. Rowe Price investment products and services. Past performance is not a guarantee or a reliable indicator of future results. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested.

The material does not constitute a distribution, an offer, an invitation, a personal or general recommendation or solicitation to sell or buy any securities in any jurisdiction or to conduct any particular investment activity. The material has not been reviewed by any regulatory authority in any jurisdiction.

Information and opinions presented have been obtained or derived from sources believed to be reliable and current; however, we cannot guarantee the sources’ accuracy or completeness. There is no guarantee that any forecasts made will come to pass. The views contained herein are as of the date written and are subject to change without notice; these views may differ from those of other T. Rowe Price group companies and/or associates. Under no circumstances should the material, in whole or in part, be copied or redistributed without consent from T. Rowe Price.

The material is not intended for use by persons in jurisdictions which prohibit or restrict the distribution of the material and in certain countries the material is provided upon specific request. It is not intended for distribution to retail investors in any jurisdiction.

Australia—Issued by T. Rowe Price Australia Limited (ABN: 13 620 668 895 and AFSL: 503741), Level 28, Governor Phillip Tower, 1 Farrer Place, Sydney NSW 2000, Australia. For Wholesale Clients only.

Canada—Issued in Canada by T. Rowe Price (Canada), Inc. T. Rowe Price (Canada), Inc.’s investment management services are only available to Accredited Investors as defined under National Instrument 45-106. T. Rowe Price (Canada), Inc. enters into written delegation agreements with affiliates to provide investment management services.

EEA—Unless indicated otherwise this material is issued and approved by T. Rowe Price (Luxembourg) Management S.à r.l. 35 Boulevard du Prince Henri L-1724 Luxembourg which is authorised and regulated by the Luxembourg Commission de Surveillance du Secteur Financier. For Professional Clients only.

New Zealand—Issued by T. Rowe Price Australia Limited (ABN: 13 620 668 895 and AFSL: 503741), Level 28, Governor Phillip Tower, 1 Farrer Place, Sydney NSW 2000, Australia. No Interests are offered to the public. Accordingly, the Interests may not, directly or indirectly, be offered, sold or delivered in New Zealand, nor may any offering document or advertisement in relation to any offer of the Interests be distributed in New Zealand, other than in circumstances where there is no contravention of the Financial Markets Conduct Act 2013.

Switzerland—Issued in Switzerland by T. Rowe Price (Switzerland) GmbH, Talstrasse 65, 6th Floor, 8001 Zurich, Switzerland. For Qualified Investors only.

UK—This material is issued and approved by T. Rowe Price International Ltd, Warwick Court, 5 Paternoster Square, London EC4M 7DX which is authorised and regulated by the UK Financial Conduct Authority. For Professional Clients only.

USA—Issued in the USA by T. Rowe Price Investment Management, Inc.,100 East Pratt Street, Baltimore, MD, 21202, which is regulated by the U.S. Securities and Exchange Commission. For Institutional Investors only.

© 2025 T. Rowe Price. All Rights Reserved. T. ROWE PRICE, INVEST WITH CONFIDENCE, and the Bighorn Sheep design are, collectively and/or apart, trademarks of T. Rowe Price Group, Inc.

202502‑4226965

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T. Rowe Price ("TRP") claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. T. Rowe Price has been independently verified for the 27-year period ended June 30, 2023, by KPMG LLP. The verification report is available upon request. A firm that claims compliance with the GIPS standards must establish policies and procedures for complying with all the applicable requirements of the GIPS standards. Verification provides assurance on whether the firm’s policies and procedures related to composite and pooled fund maintenance, as well as the calculation, presentation, and distribution of performance, have been designed in compliance with the GIPS standards and have been implemented on a firm-wide basis. Verification does not provide assurance on the accuracy of any specific performance report.

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