Global equity markets experienced severance turbulence the first half of 2025 as investors digested the potential impact of tariffs announced on “Liberation Day”, the ongoing Russian incursion in the Ukraine and the first-ever direct conflict between Israel and Iran. As the second quarter progressed, however, some tariffs were delayed and some deals were made with countries such as China and the UK. Toward the end of June, Iran and Israel confirmed a cease fire – albeit a seemingly tenuous one. The S&P, which fell over 19% in April, rebounded and reached new highs, as did the Nasdaq.
In aggregate, international equity markets did even better – the MSCI All Country World Index – ex USA was up 18.32%. Europe was the strongest region with MSCI’s relevant index up 23.91%. Increased defense spending and the hunt for value and diversification have been credited for interest in the region. In addition, a drop in the US dollar enhanced returns for domestic investors in international equities.
MSCI’s All Country Asia Pacific benchmark was up 13.58%, but there was great disparity in performance of the underlying country indices. Coming out of a recession, New Zealand’s stock market started to improve late during the period but was only up 0.3% for the half year. Hong Kong’s market benefitted from flows from mainland Chinese investors and rose 20.9%. MSCI’s Korean index rose over 39% as investors cheered the election of Lee Jae Myung as president. His government is expected to initiate investor-friendly stock market reforms that could lead to a revaluation of securities.
Other emerging markets did well, and MSCI’s representative index was up 15.57%. Strong domestic demand and increased investor interest drove the Eastern European index up 50.61%. The Latin America index was up 30.22%; EM Asia, 14.24%; and EFM (Emerging Frontier Markets) Africa, 29.65%.
Our Bastion International Value Portfolio benefitted from its European and financial exposure. There were a few stocks that had negative returns. Among the largest detractors were India technology companies Infosys and Wipro and German science and technology company Merck KGaA. Very strong performers included BNP, the largest publicly traded bank in France, Prudential PLC, an insurance company domiciled in Great Britain and Deutsche Boerse, a financial exchange company based in Frankfurt, Germany.
Stocks sensitive to tariffs, such as Diageo, one of the world’s largest distillers, and LVMH, the world’s leading luxury products group were among the negative performers in The Bastion International Equity Income Portfolio, as was Japanese optical and imaging specialist Canon. European financials also were great performers in this portfolio, including: French insurance provider AXA and British universal bank Barclays. Iberdrola, one of the largest utilities in the world, also did very well.
Although valuation differentials and the drive for diversification may continue to buoy interest in international equities, geopolitical upheaval and changing tariff regimes could negatively impact the outlook for specific countries, industries and companies. As we enter this reporting season, your Bastion Fiduciary portfolio managers will be extremely sensitive to the everchanging macro environment as well as the idiosyncrasies of our holdings and candidates as we work to optimize our portfolios.
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