October 2025
Investments
Global Investment Outlook
As featured in The Australian Financial Review, 3 November 2025.
Navigating shifting geopolitical and economic currents
The introduction of the current US administration’s broad-based global tariffs, combined with policies aimed at revitalising domestic manufacturing and production, were a catalyst for uncertainty and even dire predictions of trade and supply chain disruptions that have so far failed to eventuate.
Certainly, there have been short term impacts, such as the plunge in the US dollar early in the year, volatility in the share market and some shifts in capital flows. However, it appears that tariffs have been utilised more as a tool for negotiations, the impact on markets have largely tracked sidewards or even dissipated as the year progressed.
While the tariff landscape continues to evolve, more time will have to play out to determine any long-term impacts through the rest of this decade and beyond.
Investor implications
However, these developments have had material implications for investors. Asset allocators increased hedging and diversification away from US exposures in the first half of 2025, though flows were mixed across regions and asset classes.
For instance, foreign direct investment is shifting away from China - down 27.1% in 2024 -toward Southeast Asia, Europe, and India. This reflects strategic diversification driven by geopolitical tensions, tightened capital controls, and evolving growth outlooks.
Private credit markets, traditionally dominated by institutional investors, are seeing broader participation. As barriers to entry lower, regulators are intensifying scrutiny around transparency, compliance, and governance to mitigate any potential emerging risks.
Opportunities amid volatility
Despite geopolitical volatility, investment opportunities remain robust. McKinsey estimates that capital investment to support AI data centre demand could reach US$3.7 trillion to US$7.9 trillion by 2030. These investments offer potentially high returns, albeit with elevated risk.
For those seeking moderate to low risk and stable long-term income, infrastructure investment needs are projected to reach US$106 trillion by 2040.
Strategic portfolio construction
Navigating these global opportunities requires a growth-oriented diversified portfolio and access to the right opportunities. This is where trusted advisors within a business designed to support investors can play a critical role, by providing clients with insights and strategies for portfolio construction and investment decisions throughout their wealth journey.
The need for support is a reality of a rapidly changing and dynamic global investment environment. While private capital markets face more regulatory scrutiny that does not mean the pause button has been hit, as innovations are opening in energy transition infrastructure, digital assets and hybrid public-private vehicles.
In public markets, IPOs rebounded strongly in early 2025 following a period of lacklustre performance. This is believed to be due partly to private investors enacting exit strategies after absorbing the initial high growth, high risk phase of a business, leading to more mature companies entering public markets. The rebound has been matched with improved post-listing performance.
Evolving monetary policy
Looking forward, NAB Economics expects economic growth to be sustainable near trend and the unemployment rate to remain low. These are good settings but it’s in the context of a less benign inflation back drop, creating an expectation the RBA will maintain interest rates at 3.6% for the foreseeable future. The key domestic risk for the RBA and the interest rate outlook is that capacity constraints broaden or intensify.
In this transition phase, assets that tend to perform better include higher quality equities with earnings visibility and balance sheet strength, along with assets that tend to exhibit a relatively higher degree of inflation protection such as infrastructure and select other real assets.
Long-term investment themes
Secular trends continue to attract capital: including artificial intelligence and automation (exemplified by Elon Musk’s US$1 trillion compensation package tied to robotics), energy transition, climate tech and digital infrastructure and cybersecurity.
This trend is of particular interest to younger generations poised to inherit $5.4 trillion over the next two decades.
Looking ahead, the economic outlook appears sound, presenting a wide range of investment opportunities. While some risks remain on the horizon, the overall environment is favourable for refining and executing your wealth strategy.
