2H 2025 Global Outlook: A Great Global Rebalancing

Nick Niziolek, CFA, Dennis Cogan, CFA, Paul Ryndak, CFA, and Kyle Ruge, CFA

Key Points:

• During the first half of 2025, international markets’ strong performance demonstrated that America First policies would not be an impediment, as many feared.
• Rather, while the US stock market continued to provide compelling opportunities, the market increasingly recognized opportunities in international markets.
• We expect the tailwinds for international markets to strengthen, supported by fiscal and monetary policies, country- and region-specific themes, and individual company fundamentals.
• The Calamos Global and International Suite offers a range of choices for strategic asset allocation.

During the second quarter, international equities powered ahead, extending a year-to-date lead over the US equity market, while the dollar continued to weaken. International small caps performed with particular strength.

As Global Markets Advance, International Equities Lead the Way

Past performance is no guarantee of future results. Source: Morningstar.

As the second half of 2025 begins, we believe the case for global and international allocations is only growing stronger. Below, we highlight key considerations from our posts and papers of recent months.

US Exceptionalism Fades, International Opportunities Rise to the Forefront

For many years, a dominant narrative of US exceptionalism led many investors to look to the United States as the “only game in town.” This preference for US equities reflected a degree of tunnel vision, but of course, it was not unfounded. As we noted in our recent whitepaper, “Currents of Opportunity: Wading into International Waters through a Global Approach,” many of the most innovative companies in the world are domiciled in the United States, and a backdrop of globalism has provided US companies with many opportunities to optimize supply chains, and in turn, maximize profits. Further, foreign holdings of US assets increased in tandem with persistent and rising trade deficits with the rest of the world, providing an additional boost to US investment performance. A weakening dollar further highlighted that a significant shift is underway. (Our post, “Why the Dollar Inflection Should Not be Ignored” and a recent Chart of the Week “This Time Was Different” explores some trends in the dollar with interesting asset allocation implications.)

To be clear, we believe that many US equities will continue to offer compelling growth. Despite a chaotic start to the year on the policy front, the US economy seems positioned for continued growth, supported by a resilient consumer and healthy business spending. Policy clarity is coming into focus, which can provide additional tailwinds for US companies.

Yet, we also see an international revival. This resurgence of international opportunity has largely resulted from the Trump administration’s America First policies, which have compelled many economies to pursue their own economic growth policies more aggressively. In March, we wrote in our post “Overseas Investment Opportunities: US Policy Shifts Awaken the Sleeping Giants,” that America First policies “don’t necessarily mean US equities will lead—and they certainly don’t preclude investment opportunities overseas.”

We noted that policy shifts would catalyze other global economies to adapt, innovate, and pursue stimulative economic policies. These policies, in turn, could drive sustained relative outperformance in overseas equity markets.

This trend has indeed proven to be the case, and we are increasingly excited about the tailwinds for growth that we see worldwide. As the US pursues its more domestic-centric agenda, we are also seeing regional- and country-specific growth drivers gather force around the world.

Germany. So far this year, Germany has been the textbook example for stimulating regional growth. The country spent much of the post-Global Financial Crisis (GFC) era restraining spending and investment, but is now relaxing constitutional debt limits and embarking on a significant fiscal stimulus of more than €600 billion over the next five years. Other countries across the Eurozone will be following suit. We believe companies in the defense, industrials, materials, and financial services industries are among those best positioned to benefit from the improved spending and growth environment.

Emerging markets. We are also finding many opportunities supported by local trends in emerging markets, including China, India and Korea. As we discussed in our “Sleeping Giants” post, Beijing’s complacency regarding letting the US innovate while China made and sold goods to the US is rapidly changing. After striking a much more antagonistic tone toward Chinese tech leaders, Chinese policymakers have shifted the discourse to show support toward home-grown innovation and development. More broadly, China is focusing greater attention on diversifying its economy and strengthening its own domestic market. We are finding many opportunities to capitalize on the inflection points coming out of China.

India also remains one of the most exciting growth stories in the world, one that we’ve long recognized offers consumer and enterprise opportunities.

Opportunities across the capitalization spectrum. As the world becomes “less global,” smaller international companies are poised to offer targeted entry points into regional- and country-specific growth trends. As we noted in our post, “Small but Mighty: Why we Like International Small Caps,” not only are non-US small caps poised to generate outsized growth potential as international markets gather steam, they are also attractively valued and often more exposed to local growth drivers.

The case for global convertibles. The Calamos Global Team has a deep history in comprehensive capital structure research, including decades of experience in convertible securities. Because convertibles blend characteristics of stocks and bonds, they can provide upside equity market participation while mitigating downside risk. Leveraging this favorable risk-reward skew, we continue to use convertible structures in certain portfolios to provide lower-volatility participation in certain high-growth (but potentially more volatile) names and individual markets where we seek to actively manage a more asymmetric risk profile.

Calamos Global and International Funds

Our global and international funds share the same experienced team and time-tested process; their different risk/reward profiles and investment universes support diverse asset allocation goals.