Serapis Global Inc. — Engineered for Absolute Returns.

September 27, 2025 | Kevin D. Fulton

1. Global Growth

A Fragile Recovery Amid Diverging TrajectoriesGlobal GDP growth is projected to hover around 2.8-3.2% in 2025, slightly below pre-pandemic averages, with significant regional divergence. The U.S. continues to outperform, driven by robust consumer spending and technological innovation, though growth is expected to moderate to ~2.0% as fiscal stimulus wanes. The Eurozone, grappling with energy transition costs and demographic headwinds, is likely to see growth stagnate at ~1.2-1.5%. China’s recovery remains uneven, with GDP growth forecasts at 4.5-5.0%, constrained by property sector deleveraging and weak domestic consumption, despite aggressive stimulus measures.Emerging markets (EMs) present a mixed picture. India and Southeast Asia are bright spots, with growth rates of 6.5% and 4.8%, respectively, fueled by infrastructure investment and digital adoption. However, debt distress in frontier markets and currency depreciation risks in Latin America (e.g., Brazil, Argentina) cloud the outlook. Investors should monitor EMs for selective opportunities, particularly in technology-driven economies with stable policy frameworks.

Key Risks:

• A sharper-than-expected U.S. slowdown could ripple through global trade.
• China’s structural challenges, including deflationary pressures, may suppress commodity demand.
• Geopolitical shocks (e.g., U.S.-China tensions, Middle East instability) could disrupt supply chains.

Opportunities:

• Overweight exposure to India and ASEAN equities, particularly in tech and consumer sectors.
• Underweight Eurozone industrials, given energy cost pressures and weak export demand.

2. Inflation and Monetary Policy

The Tightrope Walk ContinuesGlobal inflation has moderated from its 2022-2023 peaks but remains sticky, with core CPI in major economies averaging 3.0-3.5%. Supply chain normalization and declining energy prices have eased headline pressures, but services inflation, driven by wage growth and housing costs, persists. The U.S. core PCE is projected at ~2.8%, above the Federal Reserve’s 2% target, while Eurozone HICP is expected at ~2.5%.Central banks are navigating a delicate balance. The Federal Reserve, after pausing rate hikes in mid-2025, is likely to maintain rates at 4.5-4.75% through Q4, with a potential 25-50 bps cut in 2026 if labor markets soften. The ECB, facing weaker growth, may cut rates by 25 bps before year-end, though fragmentation risks (e.g., Italy’s fiscal challenges) limit its flexibility. The PBOC’s easing cycle continues, with recent stimulus injecting ~1 trillion CNY into China’s economy, though efficacy remains uncertain.

Key Risks:

• Sticky inflation could force central banks to delay or reverse easing, pressuring risk assets.
• Currency volatility in EMs due to U.S. dollar strength, driven by Fed hawkishness.
• Policy missteps in China could exacerbate deflationary risks.

Opportunities:

• Short-duration, high-quality fixed income (e.g., U.S. Treasuries at 4-5% yields) offers attractive risk-adjusted returns.
• Inflation-linked bonds in developed markets as a hedge against persistent price pressures.
• Selective exposure to Chinese bonds, given PBOC easing and attractive yields.

3. Geopolitical Dynamics

A Fragmented World OrderGeopolitical risks remain elevated, with implications for trade, energy, and capital flows. U.S.-China decoupling continues, with tariffs and tech restrictions reshaping global supply chains. The CHIPS Act and EU’s Critical Raw Materials Act are accelerating onshoring, boosting domestic investment in semiconductors and green tech but raising costs for multinationals. Middle East tensions, particularly around Iran and OPEC dynamics, pose risks to oil prices, with Brent crude projected at $75-85/bbl in Q4, barring major disruptions.The Russia-Ukraine conflict, now in its fourth year, continues to disrupt grain and energy markets, though adaptation (e.g., rerouting of LNG flows) has mitigated some impacts. Meanwhile, populist movements in Europe and Latin America are challenging fiscal discipline, with implications for bond markets (e.g., widening spreads in Italian BTPs).

Key Risks:

• Escalation in U.S.-China trade tensions could trigger equity market sell-offs.
• Energy price spikes from geopolitical flashpoints (e.g., Strait of Hormuz disruptions).
• Policy uncertainty in EMs due to elections and populist surges.

Opportunities:

• Defense and cybersecurity stocks, given rising geopolitical tensions.
• Commodities (e.g., lithium, rare earths) tied to green tech and onshoring trends.
• Diversification into neutral markets (e.g., Switzerland, Singapore) to hedge geopolitical volatility.

4. Technological Disruption

AI and Energy Transition as Game-ChangersArtificial intelligence (AI) continues to reshape economies, with global AI investment projected to exceed $300 billion in 2025. AI-driven productivity gains are boosting corporate earnings in tech-heavy indices (e.g., Nasdaq, up 18% YTD), but regulatory scrutiny (e.g., EU AI Act, U.S. antitrust probes) poses risks to valuations. Investors should focus on AI infrastructure (e.g., cloud computing, semiconductors) rather than speculative AI startups.The energy transition is accelerating, with renewable energy accounting for ~30% of global electricity generation. However, supply constraints for critical minerals (e.g., copper, cobalt) and grid infrastructure bottlenecks are driving cost pressures. Green bonds and ESG-focused funds are seeing inflows, though returns depend on policy support and technological breakthroughs (e.g., next-gen batteries).

Key Risks:

• Overvaluation in AI-related equities, with potential for a correction if earnings disappoint.
• Supply chain disruptions for critical minerals, impacting EV and renewable energy sectors.
• Policy reversals in major economies (e.g., U.S. post-election) could derail green investments.

Opportunities:

• Semiconductors (e.g., Nvidia, TSMC) and data center REITs as AI infrastructure plays.
• Copper and lithium ETFs, given long-term demand from electrification.
• Green bonds in markets with strong policy frameworks (e.g., EU, Canada).

Conclusion:

Positioning for ResilienceThe global macro outlook for Q4 2025 demands a disciplined, risk-aware approach. While growth remains resilient in pockets, sticky inflation, geopolitical headwinds, and policy uncertainty warrant caution. Investors should prioritize diversification, focus on structural trends (e.g., AI, energy transition), and maintain flexibility to capitalize on volatility. By balancing defensive and opportunistic exposures, portfolios can navigate this complex landscape while capturing long-term growth.