This is even more important in today's complex investment environment, as higher tariffs threaten to hinder growth and fuel inflation, and amid investor concerns over the US government's borrowing plans. Clarity is vital for investing with conviction.

The following are key insights spanning four areas – bonds, corporate risk, the dollar, and private markets – covering the next 12 to 18 months from the latest House View presented to clients attending our Global Investment Forum earlier this month.

Bonds are back (but with a twist)

After years of being out of favor, bonds are back on investors’ radar once more. We’re modestly positive on government and corporate bonds due to the attractive yields and diversification benefits as we head into a possible economic slowdown.

Central banks remain in easing mode, with the US Federal Reserve, European Central Bank, and the Bank of England likely to cut interest rates further. This will provide support for bond prices, which rise when interest rates fall.

However, bond term premia – the extra compensation investors demand for holding longer-term debt instead of short-term duration – may continue to increase. This will be driven by geopolitical risk, inflation uncertainty, and ballooning government budget deficits.

This is why investors need to be more selective. We believe in targeting high-quality corporate credit, the shorter end of bond yield curves, and sovereign debt where central banks are likely to deliver the most rate cuts.

Corporate risk: Looking beyond the US

We expect global economic growth to slow but not collapse. For example, we’ve downgraded our US growth forecast to around 1.8% this year, from 2.8% last year, mainly due to the impact of trade tariffs.

That said, policy tailwinds are strengthening in Europe and China, creating opportunities. We’re gradually pivoting away from the US because other developed market (DM) and emerging market equities are starting to look more attractive.

Meanwhile, US equity valuations are still high following the big market rebound in April and May, and we believe European and Chinese valuations offer better value.

The dollar debate and fading exceptionalism

The dollar is a hot topic as the shine comes off the world’s reserve currency. And while we remain neutral on the US currency in the short term, we believe it could weaken in the years ahead, with signs of US exceptionalism fading.

For example, other DMs will challenge the superior growth the US has experienced in recent years, while the industry lead enjoyed by some of the US tech giants is also looking shaky. The dollar may still enjoy deep liquidity and institutional backing, but its long-term outlook looks dimmer.

The dollar has come under sustained pressure in recent months as international investors concluded that the US has become a less attractive place to deploy capital.

Private markets: A structural opportunity

Private markets are in a sweet spot, with interest rates falling, economic growth slowing but not contracting, and a legacy of undersupply in areas such as real estate, infrastructure, and private credit.

For example, global direct real estate is looking attractive, with occupier and lending markets improving, but with supply constrained.

Portfolio diversification is essential in an unpredictable world. With more frequent signs of positive correlation between stocks and bonds, with both moving up and down in tandem, standard bond-equity portfolios won’t provide enough diversification.

For investors who can tolerate less liquidity, private markets may offer diversification benefits while delivering attractive returns. However, due diligence is key because valuations can be less dependable, and risks may be underestimated.

Aberdeen House View

The following table (Table 1) provides a more detailed look at how we view the major asset classes:

Source: Aberdeen, May 2025. The views expressed should not be construed as advice or an investment recommendation on how to construct a portfolio or whether to buy, retain or sell a particular investment.

Important information

Projections are offered as opinion and are not reflective of potential performance. Projections are not guaranteed and actual events or results may differ materially.

Fixed income securities are subject to certain risks including, but not limited to: interest rate (changes in interest rates may cause a decline in the market value of an investment), credit (changes in the financial condition of the issuer, borrower, counterparty, or underlying collateral), prepayment (debt issuers may repay or refinance their loans or obligations earlier than anticipated), call (some bonds allow the issuer to call a bond for redemption before it matures), and extension (principal repayments may not occur as quickly as anticipated, causing the expected maturity of a security to increase).

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