Global Recession or Recovery? Why Consistency in Your Investment Strategy Matters

For investors, particularly expats with assets in multiple countries, it’s crucial to have a strong grasp of geopolitical influences and how they affect financial markets. With uncertainty surrounding economic growth and potential recessions, it’s important to adjust your financial plan to safeguard your wealth and capitalise on new opportunities.

In this article, we’re looking at the current global economic situation and how geopolitical factors, currency risks, and market trends intersect is key to protecting and growing wealth.

The Global Economic Outlook for 2025

The economic outlook for 2025 is still uncertain. While some economies show signs of recovery, others face persistent challenges such as inflation, high debt levels, and geopolitical instability.

United States

After a turbulent period marked by interest rate hikes and inflationary pressures, the US economy is stabilising. While growth is still modest, sectors like technology and renewable energy are driving optimism. 

The wildcard for the US in 2025 will of course be President Trump. He has made many statements which could have far reaching consequences if followed through, such as placing substantial tariffs on overseas goods and even potential action to acquire territory such as Greenland.

Europe

The European Union faces slower recovery due to energy concerns and fragmented political landscapes, with many of these issues cases or worsened by the Ukraine war. Across the continent, high inflation and a cost-of-living crisis continue to challenge consumer spending.

Many countries in Europe and the UK are dealing with a challenging domestic economic environment, and limited room to borrow without causing instability in the bond markets.

Asia

China’s post-pandemic recovery has been uneven, with a slowdown in property markets and weak consumer demand. There continues to be concern over the solvency of the real estate and lending sectors, which have the potential to cause a contagion effect to the rest of the economy.

However, India and Southeast Asia remain bright spots for growth, with favourable demographics and increasing consumer demand.

Emerging Markets and Debt Risks

Emerging economies are grappling with currency devaluations and high external debt, worsened by dollar strength. However, regions like Latin America and parts of Africa present opportunities in commodities and renewable resources.

Regardless of the potential opportunities in these areas, they are still remarkably high risk for investors and should not be considered a major part of any key portfolio.

The Central Bank Approach

Central banks worldwide, including the US Federal Reserve and the European Central Bank, have pivoted to a more cautious monetary policy stance. While this has eased fears of runaway inflation, concerns about a potential global recession persist.

 For investors, the question is not just whether a recession will occur, but how prepared they are to weather prolonged uncertainty.

 The Role of Geopolitics in Market Volatility

Geopolitical factors are playing a more significant role in shaping financial markets and economic trends than ever before. Trade tensions (particularly between the US and China - which can be expected to escalate under the Trump administration), regional conflicts, and shifting alliances create volatility and uncertainty, directly affecting investment strategies.

There are some common themes appearing:

Trade and Protectionism

The world has gone through an unprecedented level of economic globalisation. While this has seen an enormous impact in economic growth, particularly in emerging markets like China, the rise of populist politics is placing a strain on these economic ties.

US-China Relations

Ongoing tensions between the two economic superpowers continue to affect global supply chains, technology sectors, and trade policies. Investors need to watch these developments closely, as they influence everything from semiconductor stocks to commodity prices.

President Trump has made it clear he will look to double down on protectionist policies, but this is not just the view of one side of politics. As shown with the recent bank of Chinese social media platform TikTok in the US, there is concern coming from both sides of the floor.

Regional Trade Blocs

The rise of trade agreements in Asia and Africa is reshaping global commerce, offering opportunities for investment in emerging markets. China has taken an approach of economic influence in many of these parts of the world, rather than military or political influence.

As part of this economic plan, known as the Belt and Road Initiative, China has increased investment in African nations from $75 million in 2003 to $5 billion in 2021. Much of this investment has been made in the form of loans, which has come with its fair share of controversy.

Conflict and Political Uncertainty

The war in Ukraine has disrupted energy markets and created volatility in European economies. At the same time, rising tensions in the Middle East continue to cause issues both in those areas, and more widely.

Investors should consider exposure to sectors like defence, energy, and infrastructure that are directly influenced by the situation.

Climate Policies

As countries have committed to net-zero goals, investments in renewable energy, electric vehicles, and green infrastructure have been accelerating. Geopolitics plays a significant role here, with many populist figures across global politics looking to scale back the investment in green infrastructure.