Global Market Pulse (EURO)
Leveraging expertise from the MFS Market Insights team to provide timely perspectives on economic and market dynamics that are top of mind for clients.
- Investment Professional
- Insights
- Market Insights
- Global Market Pulse (EURO)
Market Insights Team
KEY TAKEAWAYS
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Economy & Markets
Economy & Markets
| Global Growth
Global outlook rebounds amid tariff pause MFS PERSPECTIVE
- Composite purchasing managers ‘ indices, which blend manufacturing and services activity, show that the global economy is muddling through the uncertainty associated with US trade policy.
- The global PMI sits just above its 5-year average despite tariff turmoil, a supportive signal for global risky assets.
| Global Interest Rates
More rate cuts, albeit more measured, are in the pipeline MFS PERSPECTIVE
- Markets are pricing in further interest rates cuts across most of EM and DM.
- Gradual disinflation has made that possible, but some countries may be nearing the end of their easing cycles.
- Generally, EM is poised for more cuts than DM, potentially providing further support for their local debt markets.
| Fiscal Term Premium Rising
Looser global fiscal policy has impacted long bond pricing MFS PERSPECTIVE
- Fiscal packages from the US, China, Europe and others have put upward pressure on long-end yields.
- Countries with higher debt-to-GDP ratios, like the US and Japan, have seen their yields increase the most.
- While longer-term concerns on debt management remain, global fiscal expansion may boost near-term growth.
| Fiscal Impact on Eurozone GDP
The fiscal impulse is set to drive a meaningful uplift in eurozone GDP MFS PERSPECTIVE
- Europe’s defense commitments are set to drive GDP growth.
- A significant portion of spending will flow to defense infrastructure, including cloud and technology, and to infrastructure projects in Germany.
- An improving outlook should boost consumer and corporate confidence, though tariffs could cause headwinds.
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Global Developed Equity
Global Developed Equity - US
Euro basedUS • UNDERWEIGHT • NEUTRAL • OVERWEIGHT
- The market rise is due to expanding multiples despite easing 2025 earnings expectations. Investors are overlooking tariff-related earnings headwinds and focusing on robust 2026 growth.
- Breadth is driven by high-risk, high-beta stocks, including meme stocks and non-profitable tech and materials.
- The Trump administration is prioritizing growth with tax incentives for capex/R&D while major spending cuts only begin in late 2026. However, this must be balanced by the cross currents of potential negative tariff impacts and already high earnings expectations.
MFS CONSIDERATIONS LARGE CAP - Large-cap cyclicals continue to dominate, led by industrials and technology.
- With growth slowing and tariff impacts expected to increase, we continue to favor large over SMID.
- Valuations remain extended and we need to see earnings growth come through to justify current levels.
- The 10 largest stocks continue to drive S&P 500 earnings growth.
SMALL/MID CAP - SMID has held up well thanks to a risk-on environment.
- SMID tends to be locally focused and less impacted by tariffs and USD weakness while supported by deregulation.
- SMID’s high exposure to industrials and financials should benefit from any growth impulse.
- Selectivity remains key as we expect increased dispersion.
GROWTH - Growth has benefited from a risk-on rally and surging semiconductor names.
- Supportive fiscal policies and loosening financial conditions should continue to support growth, but the full impact of tariffs and a further rise in yields remain risks.
- We believe investors should fade high-risk growth names for higher quality, durable growth.
VALUE - Cyclicals have dominated defensives.
- We expect financials to continue to benefit from deregulation and a steeper yield curve while industrials are supported by fiscal policy shifts.
- Expected sharp increases in power demand should continue to support utilities.
- As a result of the One Big, Beautiful Bill, a strong capex cycle should support value.
Global Developed Equity - Ex US
Euro based• UNDERWEIGHT • NEUTRAL • OVERWEIGHT
EUROPE EX UK
- European equities stand to benefit from rising defense and infrastructure spending.
- Falling rates should also be supportive for growth given Europe’s higher exposure to short-term and bank financing.
MFS CONSIDERATIONS
- Increased defense spending likely to support the technology sector.
- Banks are well positioned to benefit from improving economic growth.
- AI adoption may prove a catalyst for productivity and earning though the strong euro is a challenge.
UK
- The UK macro backdrop remains challenging, with growth outlook weakening, the employment picture deteriorating and inflation staying sticky.
- Declining UK PMIs signal that slower business activity is likely to persist and pressure earnings.
MFS CONSIDERATIONS
- The FTSE 100 is a poor proxy for the economy as it is dominated by financials whose outlooks remain positive despite the slowing local economy.
- Sectoral tariffs are driving commodity prices up, benefiting UK basic materials companies.
JAPAN
- Amid concerns over falling living standards due to rising inflation, the ruling coalition lost its majority in the upper house, but it is expected to muddle along.
- The US trade deal has been viewed positively.
MFS CONSIDERATIONS
- Japan continues to look attractive. Inflation and wage growth are positive for earnings and valuations remain reasonable.
- Rising yields pose a potential threat if they cause something in the financial system to break.
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Emerging Markets
Emerging Markets
Euro based• UNDERWEIGHT • NEUTRAL • OVERWEIGHT
EM EQUITY
- Despite ongoing property weakness, Chinese GDP is holding up due to manufacturing resilience.
- Korea and Taiwan should continue to benefit from semiconductor demand.
- Indian PMIs remain buoyant
MFS CONSIDERATIONS
- Tariffs landing at about 20% and a weaker USD poses some risks for SE Asian exporters.
- Earnings across Latin America are set to slow, except for commodity exporters.
- However, Brazil stands to benefit from a weaker USD and policy easing.
EM DEBT - HARD CURRENCY
- Despite tight spreads, the valuation backdrop remains favorable on a total-yield basis.
- Watch for the impact of global risks, ranging from Trump 2.0 to geopolitics to China’s structural headwinds.
MFS CONSIDERATIONS
- Contrary to initial concerns, EM debt has shown remarkable resilience since the US election.
- EMD remains attractive amid compelling total yield valuations.
- Given idiosyncratic risks, country selection will be key.
EM DEBT - LOCAL CURRENCY
- EM monetary policy easing, continued disinflation and relatively high real rates are positive drivers.
- Both the euro and EM FX have benefited from a weaker dollar.
- Going forward, further EUR strength is likely to be less of a headwind after the recent EUR move
MFS CONSIDERATIONS
- High local rates and a fading EM inflation impulse will provide a buffer to currency volatility.
- With the ECB signaling a pause from further cuts, EM may be an attractive asset class to increase duration exposure.
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Global Fixed Income
Global Fixed Income
Euro based• UNDERWEIGHT • NEUTRAL • OVERWEIGHT
USD DURATION
- While slowing growth and decelerating headline inflation have been supportive of duration, concerns over fiscal policy and weaker technicals have reinforced the upside risks to rates.
- Potential inflationary pressures from tax cuts and tariffs are tying the hands of the Fed.
MFS CONSIDERATIONS - Policy risks, including challenges to Fed independence, warrants caution towards US duration, in our view.
- Should growth weaken, the Fed will be compelled to ease, supporting duration.
US IG CORP
- Fundamentals remain respectable thanks to recent margin and free cash flow improvements.
- Spreads have recovered most of their post- Liberation Day widening.
- Total yield valuation is quite compelling.
MFS CONSIDERATIONS - The outlook for total return remains constructive.
- Given an uncertain macro backdrop, we have moved to neutral with an up-in-quality bias versus higher beta asset classes.
EURO IG CORP
- Sound fundamentals and robust technicals are supportive of tight valuations.
- European fiscal expansion should benefit sectors such as defense and utilities.
- Spread valuations have compressed to near record tights.
MFS CONSIDERATIONS - While yield valuations remain compelling, spreads have tightened recently and are close to their US counterparts, diminishing their relative appeal.
EURO DURATION*
- Fiscal expansion has sent bund yields higher on expectations of higher growth and issuance.
- Defense and infrastructure-related spending should be a tailwind for growth.
- ECB is nearing the end of its cutting cycle, leaving valuations less compelling.
MFS CONSIDERATIONS - We have turned tactically neutral on euro duration due to mixed macro and valuation factors.
- The strategic case for European duration is compelling given volatility in other DMs.
US HIGH YIELD
- Robust fundamentals are helped by historically low levels of leverage and strong free cash flow generation.
- Other positive drivers include low default rate projections, attractive breakeven yield valuation and a supportive macro outlook.
MFS CONSIDERATIONS - The risk/reward may be attractive for investors considering deploying credit risk exposure.
- While we are not concerned about the maturity wall, spread valuation looks stretched, so security selection is key.
EURO HIGH YIELD
- The macro backdrop and strong fundamentals, including favorable net leverage, are supportive.
- Breakeven yields remain attractive.
- Increasing European credit growth is a tailwind for spread valuations.
MFS CONSIDERATIONS - The asset class has shown resilience and remains attractive for the investor with high risk tolerance.
- Security selection remains key given the dispersion of fundamentals at the security level.
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The Global Market Pulse leverages the firm’s intellectual capital to provide perspective on broad market dynamics that are top of mind for asset allocators. We celebrate the rich diversity of opinion within our investment team and are proud to have talented investors who may implement portfolio positions and express different or nuanced views to those contained here, which are aligned to their specific investment philosophy, risk budget and entrusted duty to allocate our client’s capital responsibly.
The views expressed herein are those of the MFS Strategy and Insights Group within the MFS distribution unit and may differ from those of MFS portfolio managers and research analysts. These views are subject to change at any time and should not be construed as MFS’ investment advice, as portfolio positioning, as securities recommendations, or as an indication of trading intent on behalf of MFS.
Index data source: MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed or produced by MSCI.
Frank Russell Company ("Russell") is the source and owner of the Russell Index data contained or reflected in this material and all trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Frank Russell Company. Neither Russell nor its licensors accept any liability for any errors or omissions in the Russell Indexes and/or Russell ratings or underlying data and no party may rely on any Russell Indexes and/or Russell ratings and/or underlying data contained in this communication. No further distribution of Russell Data is permitted without Russell's express written consent. Russell does not promote, sponsor or endorse the content of this communication.
“Standard & Poor’s®” and S&P “S&P®” are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”) and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”) and have been licensed for use by S&P Dow Jones Indices LLC and sublicensed for certain purposes by MFS. The S&P 500® is a product of S&P Dow Jones Indices LLC, and has been licensed for use by MFS. MFS’ Products are not sponsored, endorsed, sold or promoted by S&P Dow Jones Indices LLC, Dow Jones, S&P, or their respective affiliates, and neither S&P Dow Jones Indices LLC, Dow Jones, S&P, their respective affiliates make any representation regarding the advisability of investing in such products. BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). Bloomberg or Bloomberg’s licensors own all proprietary rights in the Bloomberg Indices. Bloomberg neither approves or endorses this material, or guarantees the accuracy or completeness of any information herein, or makes any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith The views expressed are subject to change at any time.
These views should not be relied upon as investment advice, as portfolio positioning, as securities, recommendations or as an indication of trading intent on behalf of the advisor. No forecasts can be guaranteed.
Economy & Markets
| Global Growth
Global outlook rebounds amid tariff pause |
MFS PERSPECTIVE
|
| Global Interest Rates
More rate cuts, albeit more measured, are in the pipeline |
MFS PERSPECTIVE
|
| Fiscal Term Premium Rising
Looser global fiscal policy has impacted long bond pricing |
MFS PERSPECTIVE
|
| Fiscal Impact on Eurozone GDP
The fiscal impulse is set to drive a meaningful uplift in eurozone GDP |
MFS PERSPECTIVE
|
Global Developed Equity - US
Euro based
US |

• UNDERWEIGHT • NEUTRAL • OVERWEIGHT
|
MFS CONSIDERATIONS |
LARGE CAP |
|
SMALL/MID CAP |
|
GROWTH |
|
VALUE |
|
Global Developed Equity - Ex US
Euro based
• UNDERWEIGHT • NEUTRAL • OVERWEIGHT
EUROPE EX UK |
- European equities stand to benefit from rising defense and infrastructure spending.
- Falling rates should also be supportive for growth given Europe’s higher exposure to short-term and bank financing.
MFS CONSIDERATIONS |
- Increased defense spending likely to support the technology sector.
- Banks are well positioned to benefit from improving economic growth.
- AI adoption may prove a catalyst for productivity and earning though the strong euro is a challenge.
UK |
- The UK macro backdrop remains challenging, with growth outlook weakening, the employment picture deteriorating and inflation staying sticky.
- Declining UK PMIs signal that slower business activity is likely to persist and pressure earnings.
MFS CONSIDERATIONS |
- The FTSE 100 is a poor proxy for the economy as it is dominated by financials whose outlooks remain positive despite the slowing local economy.
- Sectoral tariffs are driving commodity prices up, benefiting UK basic materials companies.
JAPAN |
- Amid concerns over falling living standards due to rising inflation, the ruling coalition lost its majority in the upper house, but it is expected to muddle along.
- The US trade deal has been viewed positively.
MFS CONSIDERATIONS |
- Japan continues to look attractive. Inflation and wage growth are positive for earnings and valuations remain reasonable.
- Rising yields pose a potential threat if they cause something in the financial system to break.
Emerging Markets
Euro based
• UNDERWEIGHT • NEUTRAL • OVERWEIGHT
EM EQUITY |
- Despite ongoing property weakness, Chinese GDP is holding up due to manufacturing resilience.
- Korea and Taiwan should continue to benefit from semiconductor demand.
- Indian PMIs remain buoyant
MFS CONSIDERATIONS |
- Tariffs landing at about 20% and a weaker USD poses some risks for SE Asian exporters.
- Earnings across Latin America are set to slow, except for commodity exporters.
- However, Brazil stands to benefit from a weaker USD and policy easing.
EM DEBT - HARD CURRENCY |
- Despite tight spreads, the valuation backdrop remains favorable on a total-yield basis.
- Watch for the impact of global risks, ranging from Trump 2.0 to geopolitics to China’s structural headwinds.
MFS CONSIDERATIONS |
- Contrary to initial concerns, EM debt has shown remarkable resilience since the US election.
- EMD remains attractive amid compelling total yield valuations.
- Given idiosyncratic risks, country selection will be key.
EM DEBT - LOCAL CURRENCY |
- EM monetary policy easing, continued disinflation and relatively high real rates are positive drivers.
- Both the euro and EM FX have benefited from a weaker dollar.
- Going forward, further EUR strength is likely to be less of a headwind after the recent EUR move
MFS CONSIDERATIONS |
- High local rates and a fading EM inflation impulse will provide a buffer to currency volatility.
- With the ECB signaling a pause from further cuts, EM may be an attractive asset class to increase duration exposure.
BLANK
Global Fixed Income
Euro based
• UNDERWEIGHT • NEUTRAL • OVERWEIGHT
USD DURATION |
- While slowing growth and decelerating headline inflation have been supportive of duration, concerns over fiscal policy and weaker technicals have reinforced the upside risks to rates.
- Potential inflationary pressures from tax cuts and tariffs are tying the hands of the Fed.
MFS CONSIDERATIONS |
- Policy risks, including challenges to Fed independence, warrants caution towards US duration, in our view.
- Should growth weaken, the Fed will be compelled to ease, supporting duration.
US IG CORP |
- Fundamentals remain respectable thanks to recent margin and free cash flow improvements.
- Spreads have recovered most of their post- Liberation Day widening.
- Total yield valuation is quite compelling.
MFS CONSIDERATIONS |
- The outlook for total return remains constructive.
- Given an uncertain macro backdrop, we have moved to neutral with an up-in-quality bias versus higher beta asset classes.
EURO IG CORP |
- Sound fundamentals and robust technicals are supportive of tight valuations.
- European fiscal expansion should benefit sectors such as defense and utilities.
- Spread valuations have compressed to near record tights.
MFS CONSIDERATIONS |
- While yield valuations remain compelling, spreads have tightened recently and are close to their US counterparts, diminishing their relative appeal.
EURO DURATION* |
- Fiscal expansion has sent bund yields higher on expectations of higher growth and issuance.
- Defense and infrastructure-related spending should be a tailwind for growth.
- ECB is nearing the end of its cutting cycle, leaving valuations less compelling.
MFS CONSIDERATIONS |
- We have turned tactically neutral on euro duration due to mixed macro and valuation factors.
- The strategic case for European duration is compelling given volatility in other DMs.
US HIGH YIELD |
- Robust fundamentals are helped by historically low levels of leverage and strong free cash flow generation.
- Other positive drivers include low default rate projections, attractive breakeven yield valuation and a supportive macro outlook.
MFS CONSIDERATIONS |
- The risk/reward may be attractive for investors considering deploying credit risk exposure.
- While we are not concerned about the maturity wall, spread valuation looks stretched, so security selection is key.
EURO HIGH YIELD |
- The macro backdrop and strong fundamentals, including favorable net leverage, are supportive.
- Breakeven yields remain attractive.
- Increasing European credit growth is a tailwind for spread valuations.
MFS CONSIDERATIONS |
- The asset class has shown resilience and remains attractive for the investor with high risk tolerance.
- Security selection remains key given the dispersion of fundamentals at the security level.
BLANK
The Global Market Pulse leverages the firm’s intellectual capital to provide perspective on broad market dynamics that are top of mind for asset allocators. We celebrate the rich diversity of opinion within our investment team and are proud to have talented investors who may implement portfolio positions and express different or nuanced views to those contained here, which are aligned to their specific investment philosophy, risk budget and entrusted duty to allocate our client’s capital responsibly.
The views expressed herein are those of the MFS Strategy and Insights Group within the MFS distribution unit and may differ from those of MFS portfolio managers and research analysts. These views are subject to change at any time and should not be construed as MFS’ investment advice, as portfolio positioning, as securities recommendations, or as an indication of trading intent on behalf of MFS.
Index data source: MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed or produced by MSCI.
Frank Russell Company ("Russell") is the source and owner of the Russell Index data contained or reflected in this material and all trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Frank Russell Company. Neither Russell nor its licensors accept any liability for any errors or omissions in the Russell Indexes and/or Russell ratings or underlying data and no party may rely on any Russell Indexes and/or Russell ratings and/or underlying data contained in this communication. No further distribution of Russell Data is permitted without Russell's express written consent. Russell does not promote, sponsor or endorse the content of this communication.
“Standard & Poor’s®” and S&P “S&P®” are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”) and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”) and have been licensed for use by S&P Dow Jones Indices LLC and sublicensed for certain purposes by MFS. The S&P 500® is a product of S&P Dow Jones Indices LLC, and has been licensed for use by MFS. MFS’ Products are not sponsored, endorsed, sold or promoted by S&P Dow Jones Indices LLC, Dow Jones, S&P, or their respective affiliates, and neither S&P Dow Jones Indices LLC, Dow Jones, S&P, their respective affiliates make any representation regarding the advisability of investing in such products. BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). Bloomberg or Bloomberg’s licensors own all proprietary rights in the Bloomberg Indices. Bloomberg neither approves or endorses this material, or guarantees the accuracy or completeness of any information herein, or makes any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith The views expressed are subject to change at any time.
These views should not be relied upon as investment advice, as portfolio positioning, as securities, recommendations or as an indication of trading intent on behalf of the advisor. No forecasts can be guaranteed.