Given uncertainty around tariff policy, markets will likely continue to gyrate based on the developments of negotiations, along with the evolution of US monetary and fiscal policy.

As investors evaluate their portfolios and asset allocations, a few paradigms will evolve over the next few years.

For global markets, I think higher uncertainty means higher discount rates and probably lower valuations,” says Jody Jonsson, equity portfolio manager and vice chair of Capital Group.

At greatest risk of a derating are US equities, as valuations have been high over the last few years, especially for technology stocks. Coming into 2025, the S&P 500 Index traded at 21.5 times earnings on a 12-month forward price-to-earnings basis. That multiple has shrunk to 18.6 times, slightly above its 10-year average.

This recent downdraft in US equities is bringing renewed focus on non-US stocks. Over the last few years, their cheaper valuations than similar US businesses have been the main argument in favour of international equities. But other catalysts are coming into play.

In the wake of large fiscal stimulus that Germany announced in March, the prospects for growth have improved significantly in Europe’s largest economy. More broadly, member states of the European Union are focused on economic revitalisation.

Meanwhile, with fixed income, our team expects to see a price adjustment, not a full-blown crisis and talk of the US dollar no longer being the global reserve currency looks premature.

In this article, Capital Group’s portfolio managers and economists share their views on the potential implications for the economy, US dollar, stocks and bonds.