Clarity, selectivity and patience urged

THE global investment outlook is anything but straightforward, with economic policy shifts, political turbulence, rising geopolitical tensions and trade uncertainty all jostling for attention. Yet for those willing to dig deeper, fresh opportunities are emerging – provided investors tread carefully.

At Aberdeen Investments, chief investment officer Peter Branner and chief economist Paul Diggle are urging investors to keep their heads and sharpen their focus.

The duo note that in today’s complex investment environment, as higher tariffs threaten to hinder growth and fuel inflation, and amid investor concerns over US government borrowing plans, clarity is vital for investing with conviction.

In their analysis that centres on four key areas – bonds, corporate risk, the US dollar and private markets – all assessed with a 12 to 18-month outlook in mind, Branner and Diggle state that “bonds are back”.

After years in the wilderness, government and corporate bonds are drawing fresh attention, they point out in a recent note to clients.

“We’re modestly positive on government and corporate bonds due to the attractive yields and diversification benefits as we head into a possible economic slowdown,” they explain.

Central banks, they note, remain in easing mode, and with likely rate cuts from the US Federal Reserve, European Central Bank and Bank of England, bond prices could get a further lift.

But they caution: “Bond term premia may continue to increase,” thanks to persistent geopolitical uncertainty and expanding government deficits.

“That’s why they favour high-quality credit, short-duration debt, and sovereigns where rate cuts look most likely – “such as UK gilts”.

Diversification strategy

When it comes to equities, Branner and Diggle are tilting away from the United States, noting better value elsewhere.

“We expect global economic growth to slow but not collapse,” they say.

“We’re gradually pivoting away from the United States because other developed market and emerging market equities are starting to look more attractive,” they explain.

A key reason? Policy support.

“European fiscal policy has become more supportive,” they say, highlighting the European Union’s planned €800bil defence spending boost – around 5% of gross domestic product – as a major fiscal shift.

Meanwhile, Chinese and European equity valuations, they say, “offer better value” than the still-expensive US market.

On currencies, the US dollar debate looms large.

“The US dollar is a hot topic as the shine comes off the world’s reserve currency,” the Aberdeen team remarks.

While neutral on the greenback for now, they suggest the long-term picture is more fragile.

“US exceptionalism... is fading,” they argue, pointing to the narrowing growth gap and technology competitiveness with other regions. The upshot? The US dollar “may still enjoy deep liquidity and institutional backing but its long-term outlook looks dimmer”.

Private markets, meanwhile, are offering “a structural opportunity”.

With rates falling and growth cooling – but not collapsing – “private markets are in a sweet spot”. Branner and Diggle cite real estate, infrastructure and private credit as areas of interest.

“Portfolio diversification is important in an unpredictable world,” they say.

“For investors who can tolerate less liquidity, private markets may offer diversification benefits while delivering attractive returns.”

But here too, vigilance is key: “Due diligence is essential... risks may be underestimated.”

Rising opportunities

At Columbia Threadneedle Investments, chief investment officer William Davies echoes many of these themes – though with his own take on recent events.

“Market volatility has surged this year,” he notes, with April’s tariffs triggering a whiplash in equities. But volatility has also revealed opportunity.

“We believe there could be opportunities as new trade agreements are structured... At the same time, we must recognise that further announcements are likely – both positive and negative,” he adds.

Davies is pragmatic on tariffs and their global effects, arguing, “There are two sides to this coin.”

Tariffs hurt non-US exporters and flood European markets with diverted Chinese goods. But “we will likely see more spending from Europe”, especially with Germany’s fiscal pivot.

“Germany’s relaxation of the debt brake is a meaningful change and could mean higher growth in Europe than previously expected.”

Despite questions about the future of US dominance, Davies isn’t writing America off.

“It is simply too soon to dismiss US dynamism,” he asserts.

“The United States remains the most flexible and diverse large economy in the world.”

Still, globalisation’s retreat is reshaping investment logic.

Businesses are exploring reshoring or “friendshoring” to sidestep trade risks.

But even these efforts face surprises – “US President Donald Trump’s first move was to hit those very trading partners with tariffs,” Davies recalls, referring to Mexico and Canada.

As a result, businesses are understandably reluctant to commit capital, slowing global investment, he adds.

Columbia Threadneedle’s own investment strategy reflects caution and discipline.

“In credit, investment selectivity has paid off,” Davies says.

The firm leaned towards higher-quality credit in 2024, and that positioning has helped as weaker credits underperformed in 2025.

Equities, however, have proven more challenging.

“There has been a pullback in valuations for high-growth names... macroeconomic uncertainty outweighing quality in the short term,” Davies highlights.

That said, Columbia Threadneedle is sticking to its principles.

“We remain committed to companies with strong balance sheets, reliable cash flows and operational resilience,” Davies says. And while macro noise can cloud the picture, long-term themes – like artificial intelligence, healthcare innovation, and the energy transition – still carry weight.

“The pace and manifestation will vary... but their impact is undeniable,” he says.

Ultimately, Davies sees active management as more crucial than ever.

“Markets reflect past events, but investing is about anticipating what comes next,” he says.

That requires rigorous research, thoughtful positioning and the ability to distinguish between high and low conviction views.

With so much uncertainty in play, both Aberdeen and Columbia Threadneedle are urging investors not to overreact. As Davies puts it: “Uncertainty is here to stay. But if the global financial crisis and Covid-19 taught us anything, it is the danger of knee-jerk reactions... April’s tariff turmoil briefly shook markets – but policy was partially reversed days later.”

As the rest of the year unfolds, the key to navigating the storm appears to be a blend of clarity, selectivity, and patience.