As we enter the second half of the year, we reflect on the key themes that impacted markets: geopolitical instability, trade policy, and the evolving energy landscape. These remain central to our consideration and are likely to influence both investor sentiment and economic outcomes. While uncertainty persists, we identify reasons for both caution and optimism. Maintaining a focus on high-quality companies and remaining adaptable is essential for navigating the path ahead.
Macroeconomic Overview
Geopolitical tensions
Globally, we anticipated that changes within the U.S. administration might facilitate progress in conflict areas such as Ukraine, Gaza, and the Red Sea. We’ve seen some improvement in Suez and the Red Sea, but a broader resolution remains elusive. Given the recent Israeli strikes on Iran’s nuclear infrastructure, it doesn’t appear that tensions will abate swiftly. The current U.S. foreign policy appears to be evolving toward a more regionally focused stance. We believe that this shift could impact global trade, energy markets, and manufacturing supply chains. European nations, in particular, appear to be preparing for reduced U.S. involvement by accelerating their defence investments—an aspect we consider worthy of close monitoring.
Debt, gold, and economic resilience
In the United States, sustained fiscal deficits and increased debt issuance continue to raise concerns. In this context, we have observed that central banks continue to augment their gold reserves. We contend that this steady accumulation has been a significant factor in gold’s recent performance. Despite these macroeconomic headwinds, global growth has demonstrated notable resilience, and our base case continues to lean toward ongoing, albeit uneven, expansion.
Source: Bloomberg, as of May 31, 2025
Regional opportunities
India remains a focal point, and we are encouraged by its economic trajectory. The International Monetary Fund (IMF) has recently projected that India may surpass Japan this year, potentially becoming the world’s third-largest economy1 . We regard this as a noteworthy milestone, particularly as India continues its transition from an agricultural-based to an industrial-based economy. This evolution could result in significant productivity gains over time. Given its favourable demographic profile and a dynamic technology and startup ecosystem, we believe that India holds long-term investment appeal.
Risks and potential upsides
We acknowledge that risks remain. One area of focus is the potential escalation of trade tensions. Targeted tariffs could evolve into broader trade disruptions, potentially burdening global economic momentum. Similarly, a sudden surge in geopolitical instability, such as a targeted strike on energy infrastructure, could lead to a significant increase in oil prices, driving inflation and exerting pressure on energy-importing economies, particularly in Europe.
All of that being said, there exists real upside potential, 
especially in the longer term. A resolution of trade disputes could be supportive and lead to improved underlying fundamentals. An unforeseen de-escalation in Ukraine, a resolution of the Middle East conflict or a U.S. policy initiative aimed at fostering growth without significantly increasing the deficit may serve as a significant catalyst for global markets. A strong tax bill out of Congress would be a good start, as would genuine progress on regulatory reform. Although Europe and China have encountered mixed conditions, we believe that effectively addressing immediate challenges could reveal new opportunities.
While there are reasons for caution in the near term, we also see pathways to longer-term positive outcomes.
Download the full Empire Life 2025 Market Outlook (PDF).
¹ IMF, World Economic Outlook, April 2025
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July 2025
