Capital Group International Developed Equity
Mandate commentary
Q2 2025
Highlights
① International stocks rose in the second quarter, narrowly outpacing U.S. stocks. The “Liberation Day” tariff announcement on April 2 drove a global sell-off and expectations for a broad rotation from U.S. to international markets, particularly Europe. By the end of the quarter, however, markets around the world had snapped back as trade tensions moderated.
② Equities staged a sharp V-shaped recovery after tariff reversal.
③ Investors look ahead to trade-policy clarity.
Mandate overview
In a strong environment for equities, the mandate was up sharply and outpaced the MSCI EAFE Index.

Mandate: Strong quarter for international stocks
Performance contributors
Stock selection was positive across most sectors, with the most meaningful contribution coming from the choice of companies within the industrials sector.
Aerospace and defense companies, including Rolls-Royce, were among the largest contributors to results. The sector benefited from news that European leaders agreed to boost defense spending.
A larger footprint and stock selection in the information technology sector was also beneficial.
Performance detractors
In the health care sector, a position in Essilor Luxottica detracted from relative results. The eyeglasses specialist reported revenue growth of over 7% in the first quarter at constant exchange rates but fell short of expectations.
Total gross returns:
Total return | QTD | YTD | 1YR | 3YR | 5YR | SINCE INC. (FEB. 18, 2025) |
CAPITAL GROUP INTERNATIONAL DEVELOPED EQUITY | 12.54%
| 10.08%
|
Mandate repositioning
The industrials sector is the largest area of investment in the portfolio. Optimism about continued growth in air traffic to pre-COVID levels and beyond underpins many of the portfolio’s aerospace investments, while higher geopolitical tensions and an agreement by European leaders to further boost defense spending helps to support some defense companies.
The information technology sector continues to be an area of emphasis in the portfolio. Current holdings represent a diverse mix of companies, including semiconductors and semi equipment companies, notably those involved in leading-edge chip production and, more recently, IT services providers and software companies.
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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