Global shares have shown resilience so far this year, but the picture is far from uniform, with US shares down 5% in pound sterling terms and European shares up 13%¹.

The strong performance of European shares can be attributed to several factors, including more attractive share price valuations (how much investors are willing to pay for shares based on company earnings) and the German chancellor’s plans to overhaul the country’s spending to boost growth.

This is a reversal from last year, when US shares were the clear winners after a decade of strong growth, while European shares lagged. This highlights the importance of spreading your investments across different regions, so you can balance the risks and opportunities in different markets.

On that front, how have different regions been performing recently and what does it mean for the economic outlook? We summarise the key points below.

United States

The US economy has remained resilient despite significant uncertainty in the first half of 2025. The job market has cooled but is stable and inflation (the rate of increase in prices for goods and services) has been better than expected. We continue to expect core inflation, which excludes volatile food and energy prices, to end the year at 3%.

Positive trade developments with China have improved our economic outlook. We expect the US economy to grow by around 1.5% this year. Policies on trade, government spending and tax are set to continue to influence the economic outlook in the second half of the year.

The Federal Reserve, the US central bank, is unlikely to change interest rates for now but we anticipate two more rate cuts later this year. 

Euro area

We expect the euro area to grow by about 1% in both 2025 and 2026, which is slightly below the usual trend. 

Slowing global activity, partly due to interest rate uncertainty and higher tariffs, is expected to reduce demand for goods and services. The boost from Germany’s new spending package and increased defence spending across the EU is likely to come in 2026. 

We expect one more interest rate cut this year, likely in September, bringing rates to 1.75% by the end of the year.

United Kingdom

We continue to expect the UK economy to grow by around 1% in 2025 and 2026. Activity was stronger than anticipated in the first quarter, but we expect slower growth from the second quarter onwards, as uncertainty weighs on household and company spending. 

Employment growth has slowed, partly because the government raised taxes for employers in April 2025. 

We expect the Bank of England to cut interest rates each quarter, putting rates at 3.75% at the end of the year. 

Japan

Japan’s domestic demand was strong in the first quarter, with spending increasing for the fourth consecutive quarter. However, economic growth turned negative because of a decline in exports.

Looking ahead, we expect spending to remain resilient. Wages are rising steadily and as inflation gradually stabilises, consumer confidence and incomes should improve. 

We now expect interest rates to end the year at 0.75%, down from our previous forecast of 1%. Inflation is still above the Bank of Japan’s target, but tariff developments mean inflation – and growth – could fall. 

China

China’s economy has maintained steady growth so far in 2025 and key data for the first five months remains robust. Despite higher US tariffs, exports have held up well. However, tariff-related uncertainty remains high and continues to pose risks to growth.

We recently raised our 2025 economic growth forecast for China to 4.6% from 4.2%, primarily due to easing trade tensions with the US. With tariff shocks subsiding, we expect a modest interest rate cut of 0.1 percentage points, bringing rates to 1.3% by the end of the year.

¹ Returns based on the MSCI USA Index for US shares and the MSCI EMU Index for European shares, denominated in GBP as at 25 June 2025.

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