Equity performance in 2025 has been shaped by multiple crosscurrents. High levels of geopolitical uncertainty and shifting U.S. trade policy have triggered bouts of high equity volatility, while supportive fiscal agendas, easing monetary policy, strong corporate earnings and AI-related optimism have supported risk sentiment. Overall, developed market equities have posted strong double-digit gains year-to-date, sustained by a resilient macro backdrop. Watch our latest video to discover more.
Developed market equities advanced as investors focused on structural drivers rather than short-term disruptions.
Performance has varied by region and across quarters. Q1 saw rising investor fears over the outlook for U.S. equities, with U.S., policy both increasing trade tensions and causing debt and budget management concerns. European equities significantly outperformed on prospects of increased cross-Europe defense spending, fiscal expansion in Germany, and hopes for a Russia–Ukraine de-escalation.
Q2 unfolded in two phases: an early sell-off on intensified U.S. trade rhetoric and new country tariffs announced on 2 April, followed by a sharp rebound after a 90-day pause in enacting the announced tariffs. This lifted the markets which had lagged in the previous quarter, such as the U.S. and Japan, and sectors including Technology and Communication Services.
Through Q3 and into October, risk sentiment improved further with the announcement of framework trade agreements between the U.S. and its major trading partners, an expansionary U.S. fiscal package (which will offset the tariff drag on U.S. economic growth in 2026), renewed expectations of U.S. rate cuts, and strong corporate fundamentals. AI-driven corporate earnings strength (e.g., U.S. mega-cap tech. companies are on track for c.30% y/y Q3 earnings growth) has boosted U.S. and tech-focused Asian markets. This is despite sharply higher 2026 capex forecasts from the major U.S. tech. firms. Japanese equities advanced further on firm economic growth, a U.S. trade agreement, and newly elected PM Takaichi's pro-growth stance favouring fiscal expansion, accommodative policy, and targeted tax incentives.
Looking ahead, we expect a constructive equity backdrop into 2026, supported by cyclical and structural tailwinds.
Accommodative fiscal and monetary policy across developed economies underpins U.S. and global cyclical economic momentum, benefiting growth-sensitive assets. Structural drivers, e.g., accelerating AI investment, corporate reforms in Japan and Germany, and government spending on strategic priorities like defense and manufacturing resilience, create opportunities across the equity universe.
Global Markets Overview: November 2025
TESSA MANN: Market-centered October under the cloud of a US government shutdown. This has delayed key economic data and amplified fiscal uncertainty, yet Risk assets have proved resilient. Developed market equities advanced as investors focused on structural drivers.
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David is the Global Head of Asset Research at WTW, responsible for economic and capital market research. He also is a member of the Investment Assumptions Committee, who help guide investment policy globally.
