Capital Group Global Developed Equity
Mandate commentary
Q3 2025
Highlights
① Global stocks rallied during the quarter, supported by easing trade tensions, strong corporate earnings and the start of a U.S. Federal Reserve rate-cutting cycle. New trade agreements with major partners, including the E.U. and Japan, helped calm fears of a trade war. Technology stocks surged on continued enthusiasm for artificial intelligence (AI), while consumer staples lagged.
② Balancing geopolitical uncertainty with positive economic fundamentals.
③ Broad diversification remains the best way to handle mixed market conditions.
Mandate overview
In a quarter where global equities delivered positive returns, the mandate also advanced but trailed its benchmark, the MSCI World Index. Sector positioning and stock selection were the primary drivers of relative underperformance.
Mandate: global equities rising during the quarter.
Performance contributors
Industrials was the largest contributor to relative results, driven by stock selection. Aerospace and defence companies, such as Rolls-Royce and GE Vernova, were standout performers, benefiting from strong earnings and increased defence spending commitments.
Information technology contributed positively through semiconductor holdings, including Taiwan Semiconductor Manufacturing Company (TSMC), Broadcom and ASML, which gained on robust AI-related demand.
Communication services added to results, with entertainment and interactive media names like Electronic Arts rallying on acquisition speculation.
Performance detractors
Consumer discretionary detracted due to weak stock selection and a larger footprint in hotels, restaurants and leisure. Not holding Tesla, which posted strong gains, was a notable drag.
Information technology weighed on results, due to a lighter footprint in high-performing names like Nvidia and Apple, and weakness in SAP, which fell on concerns about delayed customer adoption.
Financials detracted, particularly capital markets companies such as the London Stock Exchange, which declined after cutting its subscription revenue growth target.
Materials also weighed on relative returns, due to stock selection.
Cash holdings detracted in a rising market
Total gross returns:
Total return | QTD | YTD | 1YR | 3YR | 5YR | SINCE INC. (FEB. 18, 2025) |
CAPITAL GROUP GLOBAL DEVELOPED EQUITY | 6.01%
| 13.55%
|
Mandate repositioning
Industrials remain the largest sector allocation, with continued emphasis on aerospace and defence companies, such as GE Aerospace, Safran and Rolls-Royce.
Technology is the second-largest sector in absolute terms but remains underweight relative to the benchmark. Key holdings include Broadcom, TSMC, ASML, Microsoft and Apple, with Nvidia added during the quarter.
Financials exposure remains below index weight but includes selective additions in banks and capital markets firms.
Health care positions were trimmed during the year, with AbbVie among the notable reductions.
Communication services and consumer discretionary remain lighter than the index, though the portfolio retains conviction in select names, such as Alphabet, Meta Platforms and Royal Caribbean.
Cash levels remain modest at around 4.5%, as managers deployed capital into high-conviction opportunities.
Market overview: signs of optimism emerge, despite the noise during "Liberation Day" fallout
The third quarter delivered broad gains across asset classes, with market performance largely overriding a backdrop of cautious sentiment. Investors looked past persistent trade policy headlines, increasingly treating the U.S. administration's tariff policy as noise rather than a core risk. The primary catalysts for the positive performance were a subtle shift toward lower-interest-rate expectations and resilient corporate earnings.
Signals from the U.S. Federal Reserve of imminent rate cuts were followed by a quarter percentage cut in September. Government bond yields eased into the quarter's end, supporting bond prices, while corporate bonds outperformed government bonds.
Market outlook: solid reasons for optimism, despite ongoing uncertainty
Looking ahead, the normalization of inflation is a key development, providing central banks with the flexibility to begin an easing cycle over the next six to 12 months. This anticipated shift toward more accommodative monetary policy is expected to lower borrowing costs, creating a supportive foundation for economic activity.
This should help the macroeconomic environment sustain corporate strength. Earnings are projected to remain robust, building on a consistent trend of exceeding expectations. Resilient corporate profitability continues to be a primary driver of market performance.
The combination of impending rate cuts and durable earnings growth establishes a constructive outlook for equities. This environment reinforces the principle that focusing on underlying fundamentals, rather than reacting to short-term market volatility, is a prudent strategy for capturing future growth potential.
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This commentary may contain forward-looking information, which reflects our or third-party current expectations or forecasts of future events. Forward-looking information is inherently subject to, among other things, risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed herein. These risks, uncertainties and assumptions include, without limitation, general economic, political and market factors, interest and foreign exchange rates, the volatility of equity and capital markets, business competition, technological change, changes in government regulations, changes in tax laws, unexpected judicial or regulatory proceedings and catastrophic events. Please consider these and other factors carefully and do not place undue reliance on forward-looking information. The forward-looking information contained herein is current only as of September 30, 2025. There should be no expectation that such information will in all circumstances be updated, supplemented or revised, whether as a result of new information, changing circumstances, future events or otherwise.
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