Developed market assets ended the second quarter of 2025 strongly, buoyed by robust corporate earnings, easing monetary conditions, and a moderation in geopolitical risks toward the end of the period. The quarter began on a tense note following the announcement of U.S. “liberation tariffs” and the outbreak of a 12-day war between Iran and Israel, both of which briefly unsettled markets. However, sentiment recovered following a 90-day reprieve on the tariffs, a ceasefire agreement in the Middle East, and the announcement of new trade deals between the U.S. and several key partners.
Against this backdrop, the MSCI World Index advanced 10.96%, led by the U.S., which gained 10.99% – driven by a rebound in the “Magnificent Seven,” particularly Nvidia and Microsoft. Growth stocks significantly outperformed, with the MSCI World Growth Index rising 17.67%, well ahead of the Value (3.51%) and Quality (3.72%) factors. Performance outside the U.S. was also positive: UK and European ex-UK equities posted gains of 7.55% and 10.51%, respectively, supported by easing monetary policy and reduced tariff-related risks.
Sector performance was dominated by information technology (+23.02%), communication services (+18.71%), and consumer discretionary (+10.25%), reflecting renewed enthusiasm for innovation and earnings growth. In contrast, energy (–5.76%) lagged, as the brief oil price spike in June wasn’t enough to offset weak performance earlier in the quarter. Healthcare (–4.44%) also underperformed, weighed down by policy uncertainty following proposals from the Trump campaign suggesting spending cuts in the sector.