Looming tariffs may drive deglobalization this year, according to the Investment Management Corporation of Ontario’s IMCO World View 2025 report.
The report noted that traditional globalization is being weakened by supply chain disruptions and increased economic competition among global powers. Competition between the US and China is also contributing to a stopgap slowdown in climate change and sustainability-focused investments.
This slowdown is also impacted by a rising backlash against green, environmental, social, and governance investments. Nonetheless, investors are prioritizing disruptive technologies like artificial intelligence, renewable energy, and medical advancements.
Markets are still being moulded by changing priorities related to inequality, climate change, and geopolitics through fiscal policies and government interventions. The report indicated that governments, spurred by inflationary pressures, are implementing interventionist policies to limit income disparities and modify socioeconomic landscapes.
Investors are concentrating on creating long-term value, which is reflected in their greater interest in private markets and index-based public market strategies.
Investor implications
The report indicated that private markets are expected to be crucial to gaining long-term value, especially in illiquid and emerging sectors. Industrial policy developments also generate capital investment opportunities in the infrastructure, digital technology and clean energy sectors.
With central banks adapting to higher-for-longer environments, interest rates will no longer stay persistently low. Nonetheless, dynamic policies will require more diligence to mitigate unintended risks and portfolio exposure. Thus, adaptive strategies and innovation are necessary to navigate the changing macroeconomic environment.
The report suggested that markets are anticipated to remain uneven due to regional disparities, government changes, and sector-specific dynamics.
The IMCO World View 2025 report analyzes the macroeconomic, geopolitical and technological factors influencing investments. This third edition of the report identifies accelerating, decelerating, and steady global investment trends, as well as critical asset allocation implications.
IMCO is a major not-for-profit institutional investor established to improve investment outcomes for Ontario’s broader public sector. It manages assets worth $77.4 billion for clients.