U.S. and China: Staged Performance or Possible Trade Escalation?

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In this last quarter of the year, geopolitical developments appear to have shifted the focus away from tensions surrounding the U.S. administration’s tariff policy. However, since last week, we have witnessed a resurgence of tensions between China and the United States, occurring just ahead of the scheduled meeting between Trump and Xi at the APEC summit later this month.

What happened? “On Thursday, October 9, China’s Ministry of Commerce announced the expansion of restrictions on rare earth exports, extending the limitations to foreign exporters and technologies related to rare earth elements. The following day, the Trump administration responded swiftly by imposing a 100% tariff on all Chinese products, in addition to those already in place,” summarizes Elizabeth Kwik, Director of Asian Equity Investments at Aberdeen Investments.

As clarified by Nannette Hechler-Fayd’herbe, Head of Investment Strategy, Sustainability and Research, CIO EMEA at Lombard Odier, since a meeting in Geneva in May 2025, the United States and China had been consistently postponing the implementation of tariffs and import restrictions that had been mutually threatened. According to the expert, with just a few weeks remaining until the formal end—on November 10—of the negotiated truce, the diplomatic tone has shifted, and the stakes are now higher.

“In the short term, Chinese restrictions complicate U.S. efforts to stockpile rare earth elements—metallic components essential for everything from electric vehicle motor magnets to smartphones, medical imaging, and missiles. In response, President Trump threatened to impose 100% tariffs on Chinese imports, as well as new export controls on critical chips and software aimed at curbing China’s technological advances starting November 1, and suggested he might cancel a planned meeting with President Xi Jinping. More recent comments from both sides have been more conciliatory, but escalation remains possible, and we expect a volatile few weeks ahead,” adds Hechler-Fayd’herbe.

In her view, this escalation in trade relations should not be underestimated, although it could be interpreted as a prelude to negotiations ahead of a series of deadlines. “Our expectation is that the United States and China will reach a compromise, given their level of economic interdependence; however, the risks of further escalation persist, so we are closely monitoring every development,” she notes.

Impact for Investors
Following last week’s events, Christian Gattiker, Head of Research at Julius Baer, believes that what was supposed to be a refreshing pause for the markets felt more like an “ice bucket challenge” by the close of last Friday’s session.

In his assessment, the impact was uncomfortable but ultimately healthy. “As in previous instances, we expect an eventual resumption of dialogue and some symbolic concession thereafter. From an investment perspective, we advise staying calm. The political calendar, inflation dynamics, and sentiment constraints argue against a prolonged tariff campaign. Volatility at this stage should be seen as part of the normalization process, not the beginning of a new bearish phase. The ‘cold shower’ could ultimately prove to be the healthiest outcome of all,” states Gattiker.

In this context, investors have shown concern and, as a result, Chinese stocks and Asian markets in general have suffered. “Although part of this may be short-term noise and profit-taking after the recent rally, the retaliatory measures may be more about posturing ahead of the summit. There is a possibility that both sides will ultimately find common ground to limit the impact on the markets and, in particular, Trump has previously calmed tensions when U.S. stocks and bonds began to suffer the consequences of such escalations. Moreover, on Sunday, he struck a more conciliatory tone. We will continue to closely monitor the situation,” acknowledges the Director of Asian Equity Investments at Aberdeen Investments.

Masterclass on CLOs: Everything You Need to Know Before Investing in This Asset

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CLOs Have Become the Third Most Liquid Fixed Income Market in the U.S., Behind Only Treasuries and Agency MBS. This was stated by John Kerschner, Global Head of Securitized Products and Portfolio Manager at Janus Henderson, during the Madrid Investment Summit held by the firm in September.

However, Kerschner acknowledged that this asset still offers a certain complexity premium, as not all investors are equally informed about how it works. The firm has been making ongoing efforts to educate its clients—even if that means this premium disappears—because they believe the investment opportunity in CLOs is more alive than ever. Thus, Kerschner—who manages the world’s largest actively managed CLO ETF (JAAA)—used his appearance at the event to give a class on the structuring, functioning, and characteristics of these investment instruments.

Demystifying Asset Securitization


His presentation began by addressing the very concept of securitization, with the manager noting that “it’s a big word that for some is complicated and, for others, even scary—but it doesn’t have to be.”

“Securitization is, and always has been, about gathering a pool of loans, bundling them, establishing a framework for them, and then taking the cash flow from those loans and splitting it into different levels of risk and return. That’s it. Nothing more, nothing less,” he explained simply. This applies to an auto loan, a mortgage, real estate credit, or a corporate loan—though the process has evolved over time.

Kerschner recalled that the loan market was born in the 1980s as a solution for companies that were too small or illiquid to access financing through high-yield debt. Initially, these companies turned to banks for loans, although under very strict conditions. Later, Wall Street saw an opportunity in this market, and several players started what we now know as the leveraged loan market. “The problem is that leveraged loans are fairly risky, even today, with an average rating of B,” the manager pointed out.

Continuing his explanation, Kerschner noted that “even with all the institutional investors available, the leveraged loan market began to run out of investors.” At that point, the idea emerged to use securitization technology—already present in ABS, mortgages, or real estate markets—and apply it to corporate loans. “That’s the magic of CLOs: you take something that’s relatively risky, somewhat liquid and volatile, and create other assets that are much safer, more liquid, less volatile, and with better ratings,” he summarized.

Key Facts About CLOs


The expert shared several important data points to better understand the size and behavior of this asset class. For starters, he estimates that auto ABS represent a $200 billion market and have not experienced any defaults since the late 1980s—“not even in the AAA segment.” He clarified that while some loans did default, “the securitization was structured to handle it,” which is why CLOs have not seen a single default in 40 years. Furthermore, Kerschner added, “since the Global Financial Crisis (GFC), no investment-grade CLO has ever defaulted.” “The safety works, and securitization works most of the time—especially in CLOs,” he concluded.

He pointed out that U.S. GDP amounts to $30 trillion and the EU’s to $20 trillion, while the U.S. securitization market is valued at $5 trillion—that is, about 17% of GDP “excluding agency mortgages.” In Europe, securitizations amount to just $660 billion. In short, the U.S. market is five times larger than the European one, and according to Kerschner, this distinction matters because “loans that are not securitized sit on the balance sheets of European banks; that’s why European banks are not as dynamic as U.S. banks.”

Overall, based on the expert’s data, the global CLO market is valued at $1.7 trillion, while the European market stands at about $400 billion. “Obviously, it’s not as large as the U.S. market, but proportionally it’s fairly close,” he concluded.

What Makes CLOs Special?


The remainder of Kerschner’s masterclass focused on the four main characteristics attributed to CLOs: return, safety, liquidity, and diversification.

On the first point, the expert noted that an asset combining higher yield with lower volatility clearly points to a better Sharpe ratio; CLO returns exceed those of corporate credit, with lower volatility. While acknowledging that CLO yields are floating, “even if you hedged that component, they would still show lower volatility,” he explained.

Regarding safety, Kerschner stressed that no AAA CLO has defaulted since the GFC, thanks to tightened rating agency criteria.

On liquidity, the portfolio manager highlighted the firm’s experience trading CLOs during the extreme market conditions of March 2020 at the onset of the pandemic. “This experience—especially with AAA CLOs—gave us the confidence to launch JAAA in October 2020.” Today, this ETF can trade “hundreds of millions in market value in a single day, with a one-cent bid-ask spread,” and has reached a record volume of $1.2 billion in a single session. During the significant volatility seen on April’s Liberation Day, the ETF dropped between 1% and 2%, leading the manager to note that this vehicle “has more volatility than cash, but only during dislocations.” “CLOs are much more liquid than people think,” the expert concluded.

Finally, on diversification, Kerschner stated that “CLOs are quite similar to corporate credit but offer much better diversification than leveraged loans and high yield.” He believes this is especially relevant for investors in fixed income products based on Aggregate-type indexes, where CLOs are not represented due to their floating-rate nature. “Many people are underexposed to this asset class simply because it’s not in the indexes,” the manager concluded.

Outlook for Latin America: Electoral Processes, the Dollar, Trade Tensions, and Inflation

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According to the latest report by Solunion, a credit insurance company offering services related to commercial risk management, the region is experiencing a combination of consumption dependence, low investment, and the challenge of balancing external competitiveness with internal purchasing power, all within a context of persistent inflation, political tensions, and increased exposure to trade and security risks.

Among its findings, the report notes that Latin America’s growth in recent years has been driven by the boom in commodities, increased agricultural volumes, and strong domestic consumption—factors that led to upward revisions in economic forecasts between 2022 and 2024. However, this expansion period appears to be giving way in 2025 to a phase of stalled growth.

Key Findings


“Systemic uncertainty—stemming from trade tensions, geopolitical conflicts, and financial volatility—is combining with the appreciation of regional currencies against the dollar. This movement, while improving internal purchasing power, reduces export competitiveness and encourages an increase in imports, displacing local production,” notes Luca Moneta, Senior Economist for Emerging Markets & Country Risk at Allianz Trade, one of Solunion‘s shareholders.

According to the report, in some cases, this effect has been amplified by the acceleration of trade operations to avoid tariffs, adding volatility to trade flows. For 2025, stagnant growth is expected in many economies, as well as additional risks in 2026 for key markets like Mexico and Brazil, where factors such as slowing consumption, declining remittances, and falling commodity prices could negatively impact economic activity.

“This is a scenario in which Argentina gains prominence and partially offsets the lower contribution of these two economies to regional growth,” the report adds.

According to the report, inflation remains one of the region’s main challenges, with persistent pressures in several markets despite restrictive monetary policies. In various countries, benchmark interest rates appear to have reached their peak and, based on central bank communications, could begin to decline. The average real interest rate in the region remains approximately two percentage points above that of the United States, which has contributed to the strength of local currencies.

“If interest rates were to fall prematurely and the Fed did not resume an expansionary cycle, local currencies could weaken and inflation could rise. In more dollarized economies such as Mexico and Chile, the additional boost to growth would be almost entirely offset by this price effect,” the report explains.

A Tightly Packed Electoral Calendar

A key point in the report is that the 2025–2026 electoral cycle in Latin America is unfolding in a context of growing polarization and a lack of clear majorities—a widespread phenomenon that adds uncertainty to the economic outlook.

“Insecurity is another factor impacting investment, especially in consumer-oriented sectors. Added to this is a rise in international litigation, including cases initiated between countries and investors within the region itself, with particular impact on strategic sectors such as mining and energy resources,” it states.

How Do These Factors Impact Each Economy?

From a country-by-country perspective, the report highlights that Mexico has weathered U.S. protectionism better than expected; however, consumer confidence declined following the U.S. elections. The strength of the peso has enabled some degree of monetary easing, although the upcoming 2026 review of the USMCA (T-MEC) represents a significant challenge for trade relations and investor sentiment.

In the case of Brazil, the country is experiencing modest but steady growth, driven by resilient domestic consumption and higher-than-anticipated public spending. Nonetheless, the economy faces headwinds in the form of a credit slowdown and persistent investment difficulties, which could limit the sustainability of its current growth trajectory.

For its part, Argentina is beginning to emerge from recession thanks to economic stabilization measures, although inflation is expected to remain high (24% by the end of 2025).

In Chile, consumption is rebounding due to the revaluation of copper and macroeconomic stability, but investment is constrained by the volatility of the peso.

Colombia maintains growth driven by consumption (77% of GDP), but suffers from low fixed investment, elevated fiscal risk, and political uncertainty.

Lastly, Peru maintains macroeconomic stability, with inflation below 2% and low unemployment, although domestic consumption remains weak and mining output is declining.

Ecuador, meanwhile, is showing signs of recovery, with cocoa emerging as a new key sector in primary production.

Toward More Balanced Growth

The report’s main conclusion is that growth in the region is ongoing, but overly reliant on consumption and lacking sufficient investment—with the exception of countries like Peru.

“The main challenges are high interest rates, external factors limiting room for maneuver, and a politically and socially uncertain environment. The key to sustaining the recovery will be to diversify production and improve investment conditions, thereby reducing exposure to internal and external risks that could hinder momentum,” the report argues.

Five Countries That Are Redefining the Digital Asset Landscape

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As Cryptocurrency Markets Rebound in 2025—Driven by Price Surges and the Growth of Financial Products Like Spot Bitcoin ETFs in the United States—the True Transformation Is Taking Place in a Less Visible Arena: The Geopolitical One. According to WisdomTree, Beyond Charts and Headlines, a Global Race for Digital Asset Dominance Is Taking Shape.

“Nigeria, the United States, the United Arab Emirates, Brazil, and South Korea are positioning themselves as strategic hubs for the future of cryptocurrencies. They’re not just adopting these assets—they’re operationalizing them,” says Dovile Silenskyte, Director of Digital Asset Research at WisdomTree. According to the expert, Nigeria has become “ground zero” for cryptocurrencies as a financial lifeline.

“In Lagos, Nigeria’s economic capital, cryptocurrency use is not a speculative trend but a vital financial tool. Nigeria tops global adoption rankings, driven by a combination of a digitally active youth, persistent inflation, and ineffective banking systems. Peer-to-peer use of stablecoins (especially USDT on Tron) is booming. Moreover, despite past hostility from the Central Bank, users have developed parallel pathways. The central bank’s digital currency (CBDC) pilot project, the eNaira, has failed—reaffirming the strong popular preference for decentralized alternatives,” comments Silenskyte.

U.S. and United Arab Emirates: Regulation and Testing

In the case of the United States, it remains the epicenter of global crypto financing, with unmatched institutional strength. “U.S. regulation continues to be a complex landscape, but institutional capital has begun to shape the ecosystem. The 2024 approval of spot bitcoin ETFs triggered an inflow of more than $40 billion in assets under management,” she recalls.

In this regard, major asset managers are building integrated crypto infrastructures: from tokenized treasuries to stablecoin-based solutions. “Another noteworthy development is that the state of New Hampshire made history by allowing public investments in large-cap cryptocurrencies,” the expert adds.

As for the United Arab Emirates, she notes that they have established themselves as a global-scale regulatory laboratory for digital assets. She believes Dubai is not waiting for the West to lead the way. With the Virtual Assets Regulatory Authority (VARA) at the helm, the UAE has established a clear and business-friendly licensing regime, attracting major platforms like Binance, OKX, and Bybit.

Additionally, blockchain technology is being integrated into trade finance and the real estate sector through national digital economy initiatives.

Brazil and South Korea: Two Regional Leaders

“The case of Brazil shows that the combination of technological innovation and progressive regulation leads to real adoption. The country is moving beyond being just a Latin American benchmark to becoming a central node in the regional crypto economy. PIX, the central bank’s instant payment system, integrates seamlessly with stablecoin flows; exchanges such as Mercado Bitcoin are scaling under a clear regime with tax incentives; and the digital Brazilian real (DREX) and tokenized public debt instruments are under development,” she explains.

Finally, she highlights that the South Korean crypto scene combines one of the world’s strongest retail appetites with strict regulatory oversight. It represents a mature, liquid, and increasingly regulated ecosystem that is key to the crypto map of Asia. “Local exchanges report volumes comparable to the stock market. Additionally, authorities enforce strict rules on verified identity trading, taxation, and licensing, and the country is also advancing regulatory frameworks for security tokens and DeFi,” she concludes.

Principal Partners With Barings to Strengthen Its Private Credit Platform

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Principal Financial Group has announced a strategic partnership with Barings to expand Principal’s portfolio through an allocation of up to $1 billion in high-quality customized private investments. According to the statement, the investments will be made through a separately managed account and a co-investment structure. The co-investment structure will be managed by Principal AM, Principal’s dedicated in-house asset manager, which oversees approximately 95% of Principal’s general account portfolio.

“This announcement is part of our broader approach to private markets at Principal: building selective partnerships that complement our internal expertise in credit analysis and portfolio management, within differentiated structures and assets,” said Kamal Bhatia, President and CEO of Principal Asset Management.

The partnership will focus on high-quality customized private investments, with Barings serving as the originating manager of the assets. This strengthens Principal’s commitment to enhancing the company’s general account through diversified and scalable private credit strategies, offering strong risk-adjusted returns aligned with its liabilities. Partnering with Barings Portfolio Finance, a specialized direct originator with deep experience and capability, and combining it with the strong credit analysis and portfolio management expertise of Principal Asset Management, creates a beneficial structure for the company.

“We continue to look for ways to evolve and diversify our private credit portfolio in ways that add value. This partnership deepens our presence in the private markets ecosystem, aligning our strong insurance entity and internal asset management platform with the strengths of an experienced external manager,” added Ken McCullum, Executive Vice President and Chief Risk Officer of Principal Financial Group.

For his part, Dadong Yan, Head of Barings Portfolio Finance, commented: “We are excited to partner with Principal and bring the direct investment origination platform of Barings Portfolio Finance to benefit Principal’s policyholders and shareholders. In a shifting market environment, Barings Portfolio Finance is uniquely positioned to understand the evolving needs of insurers.”

The partnership with Barings allows Principal to access a differentiated segment of the private credit market, complementing the internal capabilities of Principal Asset Management in real estate, direct middle-market lending, private corporate credit, and infrastructure credit.

Gold: No Grounds for a Correction?

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This week, gold surpassed the historic threshold of $4,000 per ounce. With an increase of more than 50% so far this year, prices are on track to post their best performance since 1979, the year when gold reached its previous all-time high adjusted for inflation.

So far this year alone, gold has already reached 52 new all-time highs. The year-to-date return is approaching 54%, already marking the highest annual return since 1979. The interest is undeniable—in September, gold ETFs recorded their best month ever. Net inflows of $17.3 billion were led by North America and Europe, with Asia also joining the rally with $2.1 billion.

In contrast to these highs, the analysis by José Manuel Marín Cebrián, economist and founder of Fortuna SFP, offers another perspective: it’s not that gold is expensive, but rather that money is losing value. “Gold is a barometer. Its quantity in the world increases slowly—around 1.5% annually through mining production—making it a store of value against currencies that multiply under monetary policies. When gold rises in dollars, euros, or yen, it is actually revealing the loss of purchasing power of those currencies. It’s a mirror that reflects distrust in the current monetary system,” he argues.

A Favorable Environment


Whether or not there are doubts about the current monetary system, the reality is that we are in a favorable environment for gold’s performance. “The slowdown in the U.S. economy, along with expectations of lower interest rates and a weaker dollar, should continue to attract safe-haven seekers to the market, while central bank purchases should also remain strong. We see very limited likelihood of a major correction, although we believe a temporary pullback could occur due to bullish market sentiment. Overall, we reiterate our constructive view and raise our price targets,” argues Carsten Menke, head of next generation research at Julius Baer.

According to the experts, this movement reflects a consistent trend of portfolio reallocation toward safe-haven assets, in a context of heightened macroeconomic uncertainty and geopolitical tensions. “In this scenario, the precious metal reaffirms its role as the leading store of value amid weakening global growth prospects,” states Antonio Montiel, head of analysis at ATFX Education.

Will There Be a Correction?


In Menke’s opinion, given price developments over the past two weeks, speculative positioning in futures has likely turned more bullish, with trend followers and technical traders entering the market ahead of the $4,000 per ounce milestone.

For Regina Hammerschmid, commodities portfolio manager at Vontobel, downside risk is minimal. “Given all the structural factors—weakening dollar, concerns over U.S. debt and government shutdown, Fed independence, elevated geopolitical risks—and cyclical ones—weakening U.S. labor market, Fed rate cuts, growth concerns driven by tariffs—pushing gold higher,” says Hammerschmid.

Still, what could stop this record rally? According to Julius Baer’s expert, historically, major corrections have almost always been triggered by improvements in economic outlooks and tighter monetary policies. “Since the Federal Reserve has just resumed its monetary easing cycle, we see very limited likelihood of that scenario repeating. A more probable scenario would be speculative fatigue, meaning all the good news is already priced in and this last leg of the rally is a case of ‘too fast, too far,’” he notes.

That said, he believes such fatigue should not trigger a correction, but rather a temporary and short-term pullback, as the fundamental environment for gold remains favorable. “Assuming a target gold allocation of 20% to 25%, in line with the global average, purchases should continue for another three to five years, according to our analysis. Therefore, we reiterate our long-term constructive view on gold, raising our price targets to $4,150 per ounce in three months and $4,500 per ounce in twelve months,” estimates Menke.

Getting Exposure to Gold


To take advantage of this rally, Marco Mencini, head of analysis at Plenisfer Investments (Generali Investments), believes the market offers two financial alternatives for gaining gold exposure: producer stocks and exchange-traded funds (ETFs).

“Despite the strong performance of producer stocks so far this year, their valuations remain attractive. Many companies are generating free cash flow (FCF) yields between 7% and 9% (high single digits) and between 10% and 12% (low double digits) relative to their market capitalization. The figure varies by company, but considering the low leverage levels, current levels offer favorable prospects. It is often thought that the profitability of gold producers cannot keep pace with the metal’s price. However, the EBITDA data from major sector ETFs—like the GDX (VanEck Gold Miners ETF)—disproves this perception,” says Mencini.

On approaching this opportunity through equities, James Luke, commodities fund manager at Schroders, highlights that gold miners are generating record margins and have significantly strengthened their balance sheets, yet their valuations are still not fully priced in. “The market is only just beginning to pay attention to them. Despite the recent boom, we must not forget that gold equity funds have seen net outflows of nearly $5 billion over the past year and a half. Investors who are not invested wonder if they missed the boat, and those who are invested wonder if it’s time to sell,” he comments.

In his view, gold stocks are not expensive and represent a good investment opportunity, at least from three perspectives: “The performance of gold stocks remains very disconnected from record free cash flow margins (which continue to grow). Additionally, gold miners are trading at low-adjusted valuations and are significantly strengthening their balance sheets. And finally, there are no signs of euphoria in the sector—rather the opposite.”

Collapse in France: A Local Issue, With Little Sign of Contagion

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Political Noise Rises in France After Prime Minister Sébastien Lecornu Submitted His Government’s Resignation on Monday to President Emmanuel Macron, less than a month after taking office and just one day after presenting the new composition of his cabinet. The question now is: what impact will this new political collapse have on European markets?

So far, the market’s reaction has been relatively moderate following the resignation of French Prime Minister Lecornu, less than a month after his appointment. “The euro is down 0.6%, French government bond spreads have risen 5 basis points in the intermediate and long maturities, and credit spreads of major French issuers have widened by just a couple of basis points. As for equities, the CAC 40 is down less than 1.5%, with banks and utilities the most affected, while most of the French large-cap index heavyweights have dropped less than 1%,” summarizes Kevin Thozet, member of the Investment Committee at Carmignac.

For now, investors are passively following the twists and turns of French politics, trying to separate noise from signal. “French Treasury issues have not been affected by this lack of visibility, and we still believe this interest rate level represents an entry point. However, we observe a slight appreciation of the dollar, reminiscent of its safe-haven status, as well as the upcoming rating agency calendars, which could add noise from time to time. Moody’s will announce its decision on October 24, and Standard & Poor’s on November 28,” comments Mabrouk Chetouane, Head of Global Market Strategy at Natixis IM Solutions (Natixis IM).

In the view of Peter Goves, Head of Developed Markets Sovereign Debt Research at MFS Investment Management, this situation adds a new layer of uncertainty to the markets. “The situation is obviously very fluid, and it is uncertain what exactly will happen next. This is one of the reasons why OAT-Bund spreads remain wide and could widen further,” he says. In the short term, he sees it as plausible that Macron may appoint a new prime minister, but “in any case, all the fundamental issues remain: how to pass a budget in a highly fragmented parliament.”

Goves shares this reflection while acknowledging the rising possibility of new parliamentary elections, the outcome of which is inherently unknowable, but represents an event risk that could result in RN gaining seats. “This remains a French matter, with limited contagion effects for the euro area as a whole. Our main takeaway is that it is difficult to argue for a significant narrowing of the OAT-Bund spread at this time,” he adds.

Experts from asset managers agree that increased uncertainty about how the political situation will be resolved does not support market sentiment. “This morning, the spreads between French treasury bonds — OATs (Obligations Assimilables du Trésor) — and German bonds have approached the historical highs of December 2024, which we view as fair, as it reflects rising electoral risk. France is trading notably above its European peers. For a further increase, one would expect new elections and a decisive swing in the polls to the right or left,” argues Alex Everett, Senior Investment Director at Aberdeen Investments. According to his analysis, overall OAT bond trading remains fairly orderly despite the political noise. “Markets are waiting for President Macron’s next move,” Everett notes.

For Michaël Nizard, Head of Multi-Asset & Overlay, and Nabil Milali, Portfolio Manager Multi-Asset & Overlay at Edmond de Rothschild AM, this political turmoil “could intensify upward pressure on French interest rates and deepen the undervaluation of the CAC 40, with significant risk that tensions spread to other assets such as French banks, the euro, and peripheral spreads.”

Possible Scenarios


It is clear that Lecornu’s resignation worsens France’s political and economic unrest. “The current political turmoil increases the risk of delays in approving the 2026 budget and significantly limits the chances of the upcoming budget including meaningful fiscal consolidation measures. This uncertainty further undermines confidence in the sustained execution of the government’s consolidation plan and raises the likelihood of fiscal outcomes being worse than expected,” comments Thomas Gillet, Director and Analyst of the Public and Sovereign Sector at Scope Ratings.

According to the expert from Aberdeen Investments, for opposition parties, this is further proof that Macron-aligned groups cannot lead Parliament, and so calls for new elections will intensify.

“New elections would further reduce President Macron’s control, so appointing another prime minister may be his preferred option. However, the discontent expressed by nearly all parties — including the Republicans and Socialists, who had so far shown more support — makes it clear that there is very little interest in reaching a consensus. At this moment, we see little reason for political optimism, as even the status quo of a new prime minister would likely only further incite opposition party anger,” he argues.

“Although the likelihood of the president resigning seems low, neither a new dissolution of the National Assembly nor the appointment of a more left-leaning prime minister can be ruled out. The latter scenario would reopen the possibility of additional fiscal measures on companies, a factor we continue to monitor closely in our portfolios,” says Flavien del Pino, Head of BDL Capital Management for Spain.

For his part, Gillet explains that President Macron now faces a limited number of options: appoint another prime minister to attempt new coalition negotiations or call early legislative elections. “However, growing political fragmentation and polarization, along with upcoming electoral milestones, are making France’s political outlook increasingly complex, raising the risk of greater short-term instability,” he notes.

Fiscal Expansion and Loose Economic Policy: The Promises of Takaichi Sanae for Japan

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The Markets Have Reflected the Surprising Victory of Takaichi Sanae as Prime Minister of Japan, With Stock Market Gains, a Boost in Fixed-Income Yields, and a Weaker Yen. Specifically, JGB bonds have continued to rise even as the Nikkei reached a record before Takaichi’s victory, due to the opposition’s call for tax cuts and speculation over rate hikes by the Bank of Japan (BoJ).

“Since she was not the favorite to win, the market had to quickly price in the impact of Takaichi’s policies on fiscal stimulus, industrial policy, and her moderate monetary outlook. The ‘Takaichi effect’ triggered a rise in equities, a weakening of the yen, and a sell-off of long-term bonds. However, some of these reactions may be excessive. The details of Takaichi’s election campaign reveal a more moderate stance on monetary and fiscal easing than the headlines suggest,” says Sree Kochugovindan, Senior Research Economist at Aberdeen Investments.

According to experts, with Takaichi’s rise to power, we could see more movement in financial markets, given her more interventionist stance and her promises to increase fiscal stimulus. “However, large public spending in a country where debt already represents 260% of GDP is something that can spook bond markets — and likely will. Nevertheless, it’s worth noting that most of Japan’s debt is held by domestic investors, which means it is less vulnerable than, for example, the UK’s debt,” warns Anthony Willis, Senior Economist at Columbia Threadneedle Investments.

Willis is struck by Takaichi’s remarks about the BoJ, which she called “stupid” for raising interest rates. “With inflation entrenched in Japan and hovering around 3%, the Bank of Japan is likely to raise rates further from what is currently an 18-year high. However, at 0.5%, they still remain relatively low,” he comments on the country’s monetary policy.

After Her Victory


As for what to expect now, experts see it as likely that equities will continue to rebound while the Japanese yen weakens, given Takaichi’s proposed plan for fiscal expansion and monetary policy easing. “A BoJ rate hike in October now appears to be off the table, as swaps now reflect only a 20% probability of a hike, down from more than 60% last week. However, yen weakness could be limited due to the narrowing of interest rate differentials between Japan and the United States. Realistically, she may still face challenges in pushing through her policies, as the Liberal Democratic Party (LDP) no longer holds a majority in either the upper or lower house of Parliament. Overall, Takaichi’s victory is positive for equities — excluding banks — and we see a more growth-friendly environment for equities,” say Magdalene Teo and Louis Chua, Fixed Income and Equity Analysts, respectively, at Julius Baer in Asia.

In the opinion of John Butler, Macro Strategist at Wellington Management, the new prime minister wants the government to lead fiscal policy while the BoJ simply executes. “Japan needs higher interest rates: it has to manage 5% nominal growth, which is above its long-term trend, and unemployment is at historic lows. The yen is being affected because real rates are now very low and the new government wants to implement an expansionary fiscal policy. I believe Japan is a great inflation story, and this is good for risk assets, particularly Japanese equities. However, all the risk now lies with the BoJ: it might raise rates if the yen goes to 1.5, but that would be a defensive move. It could raise rates in October, though I see December as more likely,” he explains.

Experts at Julius Baer acknowledge that Takaichi’s victory has brought to the forefront the policies proposed in her campaign, which are built on three pillars: managing national crises and economic growth, expansive fiscal policy, and her belief that the government is responsible for monetary policy while the Bank of Japan (BoJ) autonomously chooses the best tools. “With her leadership win, takaichi’s political stance is certainly bullish for stocks, but weighs on the yen and bonds, given the possible delay in rate hikes,” they emphasize.

For her part, the Senior Research Economist at Aberdeen Investments explains that, as a staunch conservative and protégé of the late Prime Minister Shinzo Abe, markets have started to price in Takaichi’s policies on fiscal stimulus, industrial policy, and a moderate monetary outlook. “But the softening of policy details in the campaign, the constraints of divisions within the Liberal Democratic Party, the minority government, and the bond market mean we do not expect policy changes from the Takaichi administration on the scale of Abenomics,” she concludes.

The 300 Largest Pension Funds in the World Surpass 24 Trillion Dollars in Assets

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The 300 leading pension funds in the world have reached a record volume of 24.4 trillion dollars in assets under management as of the end of 2024, according to the Top 300 Pension Funds report prepared by the Thinking Ahead Institute of WTW, in collaboration with Pensions & Investments.

According to the authors of the report, this figure represents a new milestone for the sector, surpassing the previous peak recorded in 2021, which was 23.6 trillion, and marking three consecutive years of recovery following the 2022 market correction. Even so, they explain that the growth rate has slowed: assets increased by 7.8% in 2024, compared to the 10% rise recorded in 2023.

Asset Concentration and New Priorities


The report also highlights an increase in concentration: for the first time, the 20 largest funds collectively manage more than 10.3 trillion dollars, representing 42.4% of the Top 300 total. “This subgroup grew 8.5% year-over-year, outpacing the growth rate of the overall ranking,” the report concludes.

Among the emerging strategic priorities, the document notes a greater focus on artificial intelligence: 10 funds are strengthening their AI capabilities, and 9 already consider it a priority pillar of their portfolio management. Likewise, volatility, macroeconomic uncertainty, and inflation are consolidating as the main concerns for these institutional investors.

Shift in Global Leadership


Norway’s sovereign fund, the Government Pension Fund, has become the largest fund in the world with 1.77 trillion dollars, overtaking for the first time in over 20 years Japan’s Government Pension Investment Fund (GPIF).

By region, North America consolidates its leadership, accounting for 47.2% of total assets in 2024. Although Europe slightly reduces its share to 23.7%, it continues to play a strategic role in shaping more sustainable pension models and in the adoption of ESG criteria in institutional investment. In countries such as the Netherlands and the United Kingdom, advanced practices in governance and portfolio diversification are observed. Asia-Pacific, for its part, represents 25.5%, also showing a slight decline.

According to Juan Díez, Investments Associate at WTW Spain, large pension funds are facing an increasingly complex landscape. “In an environment of rising macroeconomic volatility and growing geopolitical tension, high market concentration has catalyzed this effect, even impacting well-diversified portfolios,” he argues.

On the other hand, Díez emphasizes that the conclusions of the Top 300 report are clear: “The importance of these investment vehicles for public bodies, private companies, and individuals is at a historic high, as demonstrated by the record volume of assets under management. Faced with the growing complexity and importance of their role, funds are responding. More and more, they seek to raise governance standards, focus on long-term outcomes, and improve decision-making by exploring more innovative approaches such as the Total Portfolio Approach.”

Why 2025 Could Be Another Record Year for Global Dividends

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Global dividends recorded a strong increase in the first half of 2025, with a year-over-year rise of 7.7% in gross terms, reaching a record figure of 1.14 trillion U.S. dollars—almost matching the total for the entire year of 2017—according to Dividend Watch, part of the Capital Group Global Equity Study.

As explained in its conclusions, the total income figure for the first half was boosted by the weakness of the U.S. dollar, as dividends from Japan and Europe, in particular, were converted at much more favorable exchange rates. However, the growth of “core” dividends—which adjusts for factors such as special dividends, exchange rates, and other minor elements—was an encouraging 6.2%.

“2025 is shaping up to be another strong year for global dividends, with a solid first half and balanced growth across all regions and sectors. We remain optimistic and believe that the second half of 2025 will continue to show strong global dividend growth,” says Alexandra Haggard, Head of Asset Class Services for Europe and Asia-Pacific at Capital Group.

In her view, dividend flows can be a strong indicator of a company’s financial health and stability. “Companies that consistently pay and increase dividends typically demonstrate solid earnings, healthy cash flow, and disciplined management. By tracking dividend trends, investors can better understand company performance and their resilience to economic challenges,” she explains.

Finances Will Be Key Factors in 2025


In examining sector trends, the report identifies that the combination of the financial sector’s large size and favorable economic conditions led it to contribute two-fifths of global dividend growth in the first half of the year. The sector recorded a 9.2% year-over-year increase in core payments, reaching a record 299 billion U.S. dollars. In this regard, banks accounted for just under half of the total increase in the financial sector, and the 13 banks that contributed most to dividend growth in the first half came from various markets, indicating widespread global strength.

Other sectors that experienced robust growth included transportation—particularly shipping and airports—machinery, especially aerospace and defense groups, and software. Globally, 86% of companies increased or maintained their dividends in the first half, with an average corporate-level “core” dividend growth of 6.1% year-over-year.

Regional View: Japan, the Leader
Total income in the first half reached record levels in the United States, Canada, Japan, much of Europe, and some emerging and Pacific markets, although there was notable weakness in Australia, Brazil, Italy, China, and the United Kingdom.

Growth was strongest in Japan, where core payments rose 13.8% year-over-year, more than double the rate of the rest of the world. The record payments of 54.9 billion U.S. dollars reflect unprecedented profits and a shift in corporate culture that is returning more capital to shareholders.

The United States was the largest contributor to the year-over-year increase of 71.3 billion U.S. dollars in global payments in the first half, due to its massive size. Its core dividend growth rate of 6.1% was in line with the global average, although lower extraordinary income tempered the increase in gross income.

The second quarter is the key dividend season in Europe, and growth this year was slower compared to the past four years. Core dividend growth for the first half was 5.6% year-over-year, a rate lower than the rest of the world. Cuts by European car manufacturers, in particular, caused the region’s dividend growth to fall by a third in the first half of the year.

As highlighted by Mario González, Head of Capital Group in Iberia, US offshore, and Latam, Spanish dividends reached a record 16.7 billion U.S. dollars in the first half of 2025, representing a 12.7% increase in the core figure. “Companies that pay dividends have long served as a safe harbor in the storm, offering investors a cushion when markets turn volatile. Their ability to generate income even in times of recession makes them an attractive anchor for clients in Spain seeking resilience and reliability,” he comments.