Investing Insights

Since the beginning of the 2020s, global equity markets have risen approximately 50%, US nominal GDP has grown by over 30%, and corporate profits in the US have surged nearly 70%.

The AI boom continues to drive significant changes, yet political developments worldwide reflect growing internal divisions and polarization. According to UBS, this environment has bolstered populist leaders at the expense of centrist options.

Geopolitical Tensions

Geopolitically, tensions remain high, with ongoing challenges such as the US-China rivalry, the Russia-Ukraine conflict, and unrest in the Middle East showing little sign of resolution.

Investment Strategy

For investors, Alejo Czerwonko, Chief Investment Officer Emerging Markets Americas at UBS, believes they should maintain a strategy that balances capturing potential gains with managing risks.

"We believe that stocks have further room for growth, that bonds offer decent income generation, and that the outlook for global residential and commercial real estate investments is promising,” Czerwonko said in a note.

To counter political and geopolitical risks, as well as concerns about US government debt, the strategist highlights assets like gold and structured investments.

Opportunities and Challenges in Emerging Markets

For emerging markets, the current landscape presents both opportunities and challenges. Broader global GDP growth is creating favorable economic conditions for these regions, and many companies in emerging economies are playing a key role in the AI revolution.

Czerwonko points out countries like India and Brazil as potential beneficiaries of the changing geopolitical dynamics, provided they adopt the right strategies.

However, he cautions that emerging markets face risks from ongoing trade and tariff uncertainties, reduced US support for multilateral frameworks, and the increasing fragmentation of the global economy.

“We expect emerging market equities to achieve low-teen returns by the end of 2025, driven by an eventually more moderate approach to tariffs by the incoming Trump administration in the US, China‘s stimulus efforts, the Federal Reserve‘s ongoing rate cuts, and strong AI-driven growth in North Asia,” Czerwonko said.