The world economy is losing momentum heading into the final months of 2025, with major regions diverging in performance, according to Julius Bar’s Market Outlook Year-End 2025 report.

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The US is slowing under the weight of consumer fatigue, softer job creation, tariffs, and persistent policy uncertainty. Household consumption — which typically drives some 70% of US GDP — has been noticeably weaker this year, though easing inflation has given the Federal Reserve scope to resume rate cuts. That monetary shift is expected to erode the USD’s yield advantage and re-establish its long-term weakening trend.

China is also contending with weak domestic demand, along with structural vulnerabilities, leaving the economy heavily dependent on exports. That reliance is not only fueling global deflationary pressures but also keeping policymakers on alert for the need to roll out more stimulus measures.

But not all countries are in the same boat, including many nations in Europe, as the region is benefiting from lower inflation, lower interest rates, and an incoming wave of fiscal stimulus, putting it in what the report describes as a rare “sweet spot” for growth, inflation, and policy support.

Policy matters more than ever. With the US no longer acting as a reliable growth engine, investors are being urged to broaden their exposure to other regions. The report highlights Europe, Japan, China, and India as offering more compelling valuations and stronger policy backdrops. India, in particular, is facing headwinds from US tariffs, but retains a positive long-term equity story thanks to double-digit earnings growth, tax cuts, and monetary easing. Japan, for its part, is benefiting from corporate reforms, robust shareholder returns, and the gradual normalization of monetary policy.

On the commodities side, gold is forecast to reach new highs — potentially above USD 3.5k an ounce — as safe-haven demand rises on the back of geopolitical uncertainty, central bank buying, and a weaker USD. Oil, in contrast, is oversupplied, weighed down by both record US production and weaker Chinese consumption, keeping prices under pressure.

investors should view volatility or weak macroeconomic data as times to buy, rather than exit signals. In fixed income, they see a favorable backdrop as the Fed resumes rate cuts and credit markets stabilize. Corporate bonds — particularly in the five-to-seven-year maturity range — stand out, with investors able to benefit from both steady coupon income and potential capital gains by rolling down the yield curve. Low default rates, strong corporate fundamentals, and robust demand are reinforcing the case for investment-grade and BB-rated corporate debt, while emerging market corporates in USD or EUR offer additional diversification without exposing investors to emerging markets currency risk.

Momentum in global stock markets is still strong, though leadership is shifting away from the US toward more attractively valued regions. European industrials and financials, German mid-caps, and select Japanese and Indian companies are worth taking note of. In Japan, reforms and buybacks are boosting shareholder value, while India’s long-term growth story remains intact despite near-term tariff headwinds. China also remains constructive, with mainland-listed shares expected to recover relative to Hong-Kong-listed shares as domestic liquidity improves. Alternative assets such as private equity and hedge funds are also expected to play a larger role, providing diversification and access to high-growth themes in areas like AI, digital infrastructure, and the energy transition.

Beyond equities, alternative assets are expected to play a larger role in portfolio construction. Private equity offers exposure to innovative firms still in their high-growth phase, while hedge funds — particularly those focused on relative value, credit, and event-driven strategies — provide diversification and resilience in volatile conditions. Sectors tied to transformative growth themes such as AI, digital infrastructure, healthcare, and the energy transition are highlighted as particularly attractive avenues for long-term investors.

But the outlook is tempered by several “wild cards.” Policy missteps, geopolitical escalations, systemic issues in shadow banking, potential credit crunches, and even infrastructure disruptions could all derail the fragile balance. Still, the report stresses that portfolios built around geographic diversification, corporate credit, safe-haven assets like gold, and selective exposure to alternatives are best placed to navigate year-end volatility and turn uncertainty into openings.

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