NYLI WMC International Research Equity Fund Q1 2025 Commentary

2025-07-01 12:30:00 ET

Market Review

• Global ex-U.S. equities rose in the first quarter. Financial markets were rattled by seismic shifts in U.S. foreign policy, which significantly altered the outlook for global trade, economic growth, and inflation. Enthusiasm for Artificial Intelligence ((AI)) related expansion and a more accommodative U.S. business environment waned in response to rising economic and tariff uncertainty. Consequently, capital rotated away from the U.S. to international markets, particularly Europe, which significantly outperformed amid signs of a more favorable economic backdrop, including less restrictive monetary policy, improving leading indicators like manufacturing output, and greater fiscal stimulus. In Germany, the center right Christian Democratic Union and the Christian Social Union won the federal election, sparking optimism for economic revitalization. The new coalition government unveiled monumental spending plans to boost economic growth and defense, with total spending likely to exceed €1 trillion. In March, U.S. Treasury Secretary Scott Bessent outlined an ambitious vision to reduce the U.S. deficit to 3% of Gross Domestic Product ((GDP)) by 2028 while avoiding a recession. U.S. GDP grew by 2.8% in 2024 and the federal deficit was 6.4% of GDP. The plan aims to shift more growth back into the private sector through a combination of deregulation and affordable energy. China’s economy expanded by 5% in 2024, meeting the government’s official target. Its State Council announced a special action plan to bolster consumption and the economy, including tax incentives and subsidies for key industries.
• The MSCI All Country World ex U.S. Index returned 5.4% for the quarter. Within the index, 10 out of 11 sectors rose over the period. Communication services and financials were the top performing sectors, while information technology and real estate were the bottom performing sectors over the quarter.

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