Global Asset Allocation Perspectives

July 2025

To help guide the positioning of Scotia Portfolio Solutions, the Multi Asset Management team of Scotia Global Asset Management meets regularly to discuss and debate the current macro environment and what it means for portfolio positioning. The following report captures the team’s current views.

Key macroeconomic themes

Global economic themes that are most likely to influence our views on portfolio asset allocation over the next 12-to-18 months.

Outlook for economic growth has improved

We expect the global economy to grow modestly as monetary and fiscal policy remains accommodative. The outlook has improved as U.S. trade policy and its global impact has become clearer.

Interest rates are likely to continue to ease

While tariffs are inflationary, central banks are likely to look past resulting short-term price increases and continue to ease interest rate policy as the broader disinflationary trend continues.

Risks have recently come down but remain

Political risks have abated for now. The resumption of lower volatility and more narrow credit spreads may continue as economic growth continues to progress and recession risks recede.

Asset allocation perspectives

Equities

We have a positive view on equities relative to fixed income and cash. Supported by accommodative policy, the global economy is proving resilient despite trade policy uncertainty and geopolitical conflict.

While recession risks persist, leading indicators have improved, and central banks maintain room to cut rates further if needed.

Market concentration is increasingly concerning, but there are signs that innovation at mega cap companies is supporting a broad range of other businesses.

Fixed income

The environment is supportive of risk-on assets like equities as inflation has peaked, global fiscal policy remains stimulative and global monetary policy continues to ease.

As a result, we believe equities offer greater upside potential relative to fixed income.

With that said, given the recent appreciation of bond prices combined with higher coupon income that can be earned now, our outlook remains positive for the next 12-to-18 months across global fixed income markets.

Canada

We have a neutral view on Canadian equities. While the Bank of Canada has provided considerable easing, it’s likely we are near the end of the current easing cycle. Although negotiations continue, U.S. trade continues to be a major source of uncertainty. Canadian equities, driven by strong commodities returns, have outperformed other markets but continued outperformance is difficult to forecast.

U.S.

We have a neutral view on U.S. equities. While the pace of policy changes has slowed, uncertainty remains, making it a difficult environment for businesses to operate. Enthusiasm for U.S. mega cap companies has driven valuations to potentially concerning levels, further concentrating the S&P 500 Index into a tech-focused growth index.

International

We have a neutral view on international equities overall. U.S. trade uncertainty, although less extreme now, remains a risk to trade-dependent markets. This is offset by compelling valuations and increased fiscal stimulus. Many European and Asian currencies are also undervalued versus the U.S. dollar offering another potential opportunity.

Emerging Markets

We have a neutral view on emerging market (EM) equities overall. Many EM economies are sensitive to U.S. trade policy. Beyond China, other markets have been targeted, including Korea, Taiwan and Brazil. Relatively low valuations and rapid tech advancements provide offsetting opportunities as is the potential for more stimulus in China.

For further information, download the full Global Asset Allocation Perspectives Report.

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As of June 30, 2025.

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