Capital Group Global Developed Equity
Mandate commentary
Q2 2025
Highlights
① Global stocks advanced in a volatile quarter marked by erratic trade policy, surging technology stocks and a ceasefire in the Iran-Israel war. The quarter opened with a wave of new U.S. tariffs, sending stocks sharply lower, and ended with a powerful rally as some levies were paused and global trade negotiations progressed.
② Equities staged a sharp V-shaped recovery after tariff reversal.
③ Investors look ahead to trade-policy clarity.
Mandate overview
In a quarter where market volatility continued, global equities returns were positive and the mandate outpaced its benchmark, the MSCI World Index. Strong stock selection was the primary driver of relative results during the quarter.
Mandate: Global equities rising during the quarter
Performance contributors
The industrials sector was the largest contributor to relative results during the quarter due to stock selection and a larger footprint. The portfolio’s focus on aerospace and defense companies was a particular area of strength, as Rolls-Royce and Safran (among others) were top contributors.
Consumer-related sectors contributed to results during the quarter, driven by stock selection. Among the top contributors was cruise operator Royal Caribbean, whose shares advanced on a good set of first-quarter results and the introduction of new ships and destinations.
Performance detractors
The health care sector weighed on results due to weak stock selection, especially within biotechnology, health care equipment and supplies, and pharmaceuticals companies.
Within the financials sector, weak stock selections in capital markets and insurance companies were a particular area of weakness. Marsh McLennan was among the top detractors as shares fell against worries over weaker conditions in the property insurance segment.
Total gross returns:
Total return | QTD | YTD | 1YR | 3YR | 5YR | SINCE INC. (FEB. 18, 2025) |
CAPITAL GROUP GLOBAL DEVELOPED EQUITY | 11.74%
| 6.44%
|
Mandate repositioning
Industrials continues to be the largest sector on an absolute basis and remains the largest relative to the benchmark. Aerospace and defense companies are a key area of focus due to pent-up demand for travel and evolving defense budgets.
The information technology sector represents a large absolute portion of the portfolio but has the lightest relative emphasis compared to the benchmark index. Semiconductors and semiconductor equipment constitute a key area of investment and represent the largest absolute subset within the sector.
Market overview: volatility gripped global markets during "Liberation Day" fallout
The second quarter of 2025 served as a stark lesson in the market’s ability to absorb sharp, politically driven shocks. The period was dominated by the U.S. administration's chaotic trade policy, beginning with the April announcement of sweeping tariffs, which sent global equities into a tailspin. The S&P 500 Index plunged into correction territory, marking its most significant retreat since March 2020.
This initial panic sent investors fleeing to safe havens, a move clearly reflected in the 5.7% surge in gold prices this quarter. However, the administration’s subsequent and rapid reversal of the policy triggered an equally dramatic V-shaped recovery. The initial fear that gripped the market evaporated, and major equity indices charged back into positive territory
Throughout this turbulence, central banks remained on the sidelines. The U.S. Federal Reserve (the Fed) and the Bank of Canada (BoC) held rates steady, caught between the inflationary threat of tariffs and the risk of a corresponding economic slowdown.
Market outlook: solid reasons for optimism, despite ongoing uncertainty
The world is rarely free of turmoil. Over the past five years, the world economy has faced a global pandemic, multi-decade inflation highs, aggressive interest rate hikes and significant international conflicts. Yet, despite these challenges, markets have demonstrated resilience as businesses adapt, consumers adjust, and economies discover new pathways to growth.
Looking ahead, trade policy clarity and its influence on corporate earnings will be key drivers of market sentiment. Attractive equity valuations and the potential for mid-teens earnings growth provide reasons for optimism, though uncertainty around policy and geopolitical risks remains a headwind. Central banks are expected to shift toward more accommodative monetary policy, with rate cuts anticipated in some regions. This could support economic growth while stabilizing markets, particularly in fixed income.
Persistent volatility may weigh on sentiment in the near term, especially in areas more exposed to trade tensions. However, as these risks moderate, the outlook should improve, with opportunities emerging in sectors poised to benefit from easing uncertainty. It’s important to remember that volatility, while challenging, can also create opportunities.
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