Navigating the Currents: Harding Loevner's Q2 2025 Vision for International Developed Markets
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- September 09, 2025
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Q2 2025 presented a complex tapestry of global economic signals for international developed markets. While inflation continued its gradual retreat from peak levels, central banks remained vigilant, balancing growth concerns with persistent price pressures. In this dynamic environment, Harding Loevner’s International Developed Markets Equity strategy navigated with an eye on long-term value and sustainable growth, offering insights into both the challenges and the compelling opportunities that emerged.
The second quarter saw international developed markets demonstrate a degree of resilience, albeit with varied performance across sectors and geographies.
Equity markets, particularly in Europe and parts of Asia, showed a tentative upward trajectory, often buoyed by strong corporate earnings reports that defied earlier recessionary fears. However, investor sentiment remained a delicate balance, swayed by macroeconomic data points, geopolitical developments, and the ongoing debate surrounding the timing and magnitude of interest rate adjustments.
Inflationary pressures, while moderating, continued to be a central theme.
Energy prices, supply chain dynamics, and wage growth remained under scrutiny, dictating the pace of monetary policy. Central banks, notably the ECB and the Bank of Japan, maintained a cautious stance, with any signals of future policy shifts having immediate market repercussions. Geopolitical stability, or the lack thereof, also cast a shadow, influencing commodity markets and investor confidence in certain regions.
Despite these headwinds, select industries, particularly those geared towards technological innovation and sustainable solutions, displayed robust fundamentals.
Europe’s markets, initially pressured by energy concerns and inflationary fears, found some footing as economic data suggested a potential soft landing.
Consumer spending showed flickers of revival, and industrial activity, while not uniformly strong, offered pockets of growth. Japan, on the other hand, continued its journey of structural economic reform, with corporate governance improvements and a supportive monetary policy environment drawing increased international investor interest.
Companies demonstrating strong balance sheets and a clear pathway to sustainable earnings growth were particularly favored.
In this intricate landscape, Harding Loevner’s approach centered on identifying high-quality companies with durable competitive advantages. The focus remained on businesses capable of generating consistent free cash flow, possessing strong management teams, and operating in industries with long-term secular growth drivers.
Rather than succumbing to short-term market volatility, the strategy emphasized patient, fundamental analysis, seeking out companies that could compound value over time regardless of the prevailing economic cycle. This disciplined methodology helped the portfolio weather sector rotations and capitalize on undervalued opportunities.
As we look towards the second half of 2025, Harding Loevner maintains a stance of cautious optimism for international developed markets.
While the path to sustained global economic expansion may encounter further bumps, the underlying strength of innovative companies, coupled with potential policy pivots and a receding inflation threat, could unlock significant value. The team remains committed to its philosophy of selective investing in high-quality enterprises, believing that true long-term outperformance stems from owning businesses with intrinsic merit and the capacity to thrive in an ever-evolving global economy.
Investors are encouraged to consider the enduring power of quality and the strategic importance of diversification in their portfolios.
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