Global growth in question and diverging economic fortunes
Most economists believe the global economic outlook has worsened since the start of the year due to US President Donald Trump’s stance on tariffs, according to the World Economic Forum. Its latest Chief Economists Outlook warns that uncertainty caused by such policies will delay strategic business decisions and heighten recession risks.
The report also highlighted “the extraordinary speed of the AI revolution” as a potential source of further short-term volatility. “While recent breakthroughs in AI have captured global attention and driven projections of a $4.8 trillion market by 2033, the anticipated surge in productivity and growth remains elusive,” it noted.
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Growth expectations vary
Gross Domestic Product (GDP), which measures the monetary value of goods and services produced by a country, is regularly used to describe the health of the economy. When GDP is rising, businesses are producing more and consumer confidence is likely to be high. If it’s falling, the economy is shrinking and the outlook is probably gloomy.
Most chief economists (77%) were anticipating weak growth during 2025 in the US, as well as high inflation and a weakening dollar when the study was carried out in early April 2025*. However, they were cautiously optimistic about Europe’s prospects on the back of fiscal expansion, particularly in Germany.
Elsewhere, their outlook for China was fairly muted, with respondents divided as to whether the country will reach its target of 5% GDP growth this year. On a positive note, optimism was high in South Asia, with 33% of economists expecting strong or very strong growth during 2025*.
Global dominance
So, which countries are currently the most economically powerful – and what are the best ways of getting exposure to them via investment funds? Well, the United States remains the global powerhouse with a GDP figure of around $27.7 trillion, with China, Germany, Japan and India completing the top five**.
United States — The M&G North American Dividend fund is a bottom-up, concentrated portfolio that scours this region for companies that can reliably grow pay-outs to investors. We like this fund’s well-defined investment approach that seeks to benefit from income investing to drive long-term capital appreciation and compounding returns.
China — The Allianz China A-Shares fund focuses on buying the stocks of companies that are incorporated in China and listed as A-shares on the stock exchanges of Shanghai or Shenzhen.
The portfolio targets sustainable growth businesses in a market that is very large and inefficient, which means there are plenty of opportunities for active investment.
Germany — The Janus Henderson European Selected Opportunities fund has almost 25% exposure to this country, with holdings in company such as software giant SAP***. We like how the managers of this portfolio consider the macroeconomic environment and sector considerations, as well as the prospects of individual companies. It’s a core European holding.
Japan — The Comgest Growth Japan fund consists of 30-40 high-quality, long-term growth companies that are bought on the basis of a three to five-year outlook. The team behind it has an unconstrained approach and has demonstrated good active management in a region which has been traditionally challenging for managers to display an edge.
India — Indian companies of all sizes make up the UTI India Dynamic Equity fund, with its investment process focused on quality, growth and valuation. We like the team’s expertise and the fact it conducts thorough on-the-ground research to find companies with a high potential to significantly outperform the market.
United Kingdom — The AXA Framlington UK Mid Cap fund uses thematic long-term ideas to help construct a portfolio of dynamic growth companies that are most likely to benefit. We like the flexibility that the funds managers have to invest in both the FTSE 100 and the small-cap space as it enables them to run the winners as well as investing early in strong growth stories.
While we’ve identified interesting funds in the various sectors, how about options for those wanting to take a broader approach?
Global — One possibility is Lazard Global Equity Franchise, which looks for companies around the world that are displaying an edge in their respective business sectors. While businesses of any size are considered, the fact that its managers are looking for industry leaders means there’s a natural bias towards larger firms.
An alternative fund is the Liontrust Sustainable Future Global Growth fund, which builds a portfolio based around the key structural growth trends it’s identified. This fund has delivered excellent returns over the past two decades by maintaining its approach to sustainability and the strength of company management.
*Source: World Economic Forum, Chief Economists Outlook, May 2025
**Source: International Monetary Fund, April 2025
***Source: fund factsheet, 30 April 2025
Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. The views expressed are those of the author and fund managers and do not constitute financial advice.