Broad Equity Compass

Broad Equity Compass Q4 2025

21 ottobre 2025 tempo di lettura 4 min

Krzysztof Janiga, CFA

Senior Equity ETF Strategist

Investment Outlook: Navigating divergence in a risk-on market

This year equity investors have moved from panic on Liberation Day, through Q2 anxiety, to a notably more bullish stance in Q3. Abating trade-related uncertainty, strong corporate earnings, and the long-awaited resumption of US interest rate cuts have driven equity indices to record highs around the world.

But this upward move has been uneven. Interest in Europe waned as the peace process in Ukraine stalled, and the focus shifted from long-term rearmament and fiscal spending to more immediate concerns about anemic economic growth (0.1% in Q2).¹ Meanwhile, the US regained momentum in equity earnings and flows, and the real economy appears to have begun to reaccelerate, as shown by Q2 3.8% growth.² State Street economists forecast 1.8% growth in 2025 and a reacceleration to 2.3% in 2026. US exceptionalism—a theme questioned by market participants around the world earlier this year—may be coming back.

Growth & earnings embolden risk taking in the US

The advantage of US risk assets goes beyond macroeconomics. The AI capital investment cycle and earnings in technology and technology-adjacent stocks have proved resilient and are expected to contribute to low double-digit earnings growth in the S&P 500®. This growth, concentrated in a handful of stocks, justifies market concentration and elevated valuations.

A continued broadening of market performance within the US through small and mid caps appears plausible. The primary risk to this outcome is a softening labour market rather than reaccelerating inflation. However, Federal Reserve (Fed) cuts are not set in stone and the pace of easing, determined by price dynamics, is likely to remain a key market driver. The trade-related uncertainty that occupied investors’ minds during the first several months of the year also abated in Q3, providing a boost to risky assets—particularly in the US.

US dollar weakness in the first half of the year hurt US equity returns for unhedged European investors. The S&P 500 gained less than 1% in euro terms over the first nine months of the year—while the S&P 500 Dynamic Hedged Index returned 13%.³ The US dollar stabilized in Q3, reflecting fading trade concerns and rebounding US growth, but market participants across Europe may consider hedging against potential FX volatility. Hedging is cheaper due to a partial alignment of expected interest rate paths.

Outside US, tariffs paint a less rosy picture

The 15% rate imposed on the European Union is no longer a theoretical risk. It is a clear headwind to export-dependent European large caps. India and Switzerland face disproportionately elevated tariffs, but we expect trade deals before year end could serve as a tailwind for their assets. Most tariff rates are set and their impact on inflation has been manageable—but rates remain subject to change, and their influence on the global supply chain will need to be closely monitored in the coming quarters.

EM equities remain attractive

We remain constructive on emerging market (EM) equities. This long-unloved area has rebounded, delivering 27.5% in the first three quarters of 2025.⁴ EM equities remain attractive despite this rapid rally because of strong growth expectations and undemanding valuations. Chinese technology giants have emerged as strong contenders in the AI race between the US and China, leading to Chinese government’s shift from scrutiny of its tech private sector to cooperation. The same AI theme, albeit in a different form, supports companies in Taiwan and South Korea which are embedded in the global semiconductor supply chain. A weakening US dollar is another powerful and broad EM tailwind.

How can investors look to position portfolios now?

The investment environment has improved, albeit divergently. We believe investors should consider adding risk in areas of strength, such as the US and emerging markets, while remaining more selective in Europe, including the UK. We advocate for opportunities in European small-cap stocks, which have so far been more insulated from tariffs and offer robust earnings growth.

Investing strategies to consider in split markets

Theme 1: Return of US exceptionalism

US small and mid caps

The SPDR® Russell 2000 U.S. Small Cap UCITS ETF (Acc) tracks the Russell 2000 Index, which is a free float-adjusted, market capitalisation-weighted index of approximately 2000 securities, providing investors with an unconstrained benchmark for smaller US companies. The home bias offers more direct access to US exceptionalism and undemanding multiples mitigate valuation concerns.

S&P MidCap 400 Index is a float-adjusted, capitalisation weighted index of 400 securities, providing investors with a benchmark for mid-sized US companies. The index offers domestic, cyclical US equity exposure, trades at lower multiples than large caps, and offers higher quality compared to small caps. Euro-denominated investors may consider hedging the US dollar exposure.

Investors may also access the S&P MidCap 400 Scored & Screened Leaders Index. This best-in-class sustainability index is designed to measure the performance of securities from the S&P MidCap 400 index universe with stronger than average sustainability characteristics, excluding controversial business activities with negative social or environmental impacts.

The MSCI USA Small Cap Value Weighted UCITS ETF tracks an index derived from the traditional market-capitalisation-weighted parent index, the MSCI USA Small Cap. The value methodology of the index re-weights each security in the parent index to emphasize those stocks with lower valuations within the parent index. The underlying index is skewed toward Financials, so it would likely benefit from curve steepening, a robust US economy, and government deregulation.

US large caps

The S&P 500 offers robust earnings growth and is relatively insensitive to weakening labour market conditions, thanks to its reliance on technology, making it a more defensive play compared to other regions. A combination of the S&P 500 with small caps or EM equities may protect against the downside and allow participation in the upside potential, should the broadening of market performance continue. Investors can hedge their FX exposure using currency-hedged share classes.

Theme 2: Emerging markets benefit from the great divergence

The MSCI Emerging Markets Index is a free float-adjusted market capitalisation index designed to measure equity market performance of emerging markets, allowing investors to gain exposure to global equity markets including China, India, South Korea and Taiwan. Investors may want to consider investing in a broad SPDR MSCI Emerging Markets UCITS ETF in which EM Asia represents approximately 80% or focus on Southeast Asia via the SPDR MSCI EM Asia UCITS ETF. The SPDR MSCI Emerging Markets Small Cap UCITS ETF overweights India and underweights China relative to the large cap index, and may serve as a complementary exposure.

Theme 3: European small caps—policy tailwinds and tariff insulation

The SPDR UCITS ETF range offers funds tracking two European small cap indices. The MSCI Europe Small Cap Index captures small-cap representation across the 15 developed markets in the region. The MSCI Europe Small Cap Value Weighted Index uses value methodology to re-weight each security in the parent index to emphasise stocks with lower valuations within the parent index. Both indices focus on companies with more domestic revenue than MSCI Europe, potentially providing a degree of tariff insulation.

Footnotes

Disclosure

Marketing Communication
Information Classification: General Access
For Professional Clients Only

For qualified investors according to Article 10(3) and (3ter) of the Swiss Collective Investment Schemes Act (“CISA”) and its implementing ordinance, at the exclusion of qualified investors with an opting out pursuant to Art. 5(1) of the Swiss Federal Law on Financial Services (“FinSA”) and without any portfolio management or advisory relationship with a financial intermediary pursuant to Article 10(3ter) CISA (“Excluded Qualified Investors”) only.

For Investors in Austria: The offering of SPDR ETFs by the Company has been notified to the Financial Markets Authority (FMA) in accordance with section 139 of the Austrian Investment Funds Act. Prospective investors may obtain the current sales Prospectus, the articles of incorporation, the KID as well as the latest annual and semi-annual report free of charge from State Street Global Advisors Europe Limited, Branch in Germany, Brienner Strasse 59, D-80333 Munich. T: +49 (0)89-55878- 400.F: +49 (0)89-55878-440.

For Investors in Finland: The offering of funds by the Companies has been notified to the Financial Supervision Authority in accordance with Section 127 of the Act on Common Funds (29.1.1999/48) and by virtue of confirmation from the Financial Supervision Authority the Companies may publicly distribute their Shares in Finland. Certain information and documents that the Companies must publish in Ireland pursuant to applicable Irish law are translated into Finnish and are available for Finnish investors by contacting State Street Custodial Services (Ireland) Limited, 78 Sir John Rogerson’s Quay, Dublin 2, Ireland.

For Investors in France: This document does not constitute an offer or request to purchase shares in the Company. Any subscription for shares shall be made in accordance with the terms and conditions specified in the complete Prospectus, the KID, the addenda as well as the Company Supplements. These documents are available from the Company centralizing correspondent: State Street Banque S.A., Coeur Défense — Tour A — La Défense 4 33e étage 100, Esplanade du Général de Gaulle 92 931 Paris La Défense cedex France or on the French part of the site ssga.com. The Company is an undertaking for collective investment in transferable securities (UCITS) governed by Irish law and accredited by the Central Bank of Ireland as a UCITS in accordance with European Regulations. European Directive no. 2014/91/EU dated 23 July 2014 on UCITS, as amended, established common rules pursuant to the cross-border marketing of UCITS with which they duly comply. This common base does not exclude differentiated implementation. This is why a European UCITS can be sold in France even though its activity does not comply with rules identical to those governing the approval of this type of product in France. The offering of these compartments has been notified to the Autorité des Marchés Financiers (AMF) in accordance with article L214-2-2 of the French Monetary and Financial Code.

For Investors in Germany: The offering of SPDR ETFs by the Companies has been notified to the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) in accordance with section 312 of the German Investment Act. Prospective investors may obtain the current sales Prospectuses, the articles of incorporation, the KIDs as well as the latest annual and semi-annual report free of charge from State Street Global Advisors Europe Limited, Branch in Germany, Brienner Strasse 59, D-80333 Munich. T: +49 (0)89-55878- 400. F: +49 (0)89-55878-440.

Ireland: State Street Global Advisors Europe Limited (“SSGAEL”), regulated by the Central Bank of Ireland. Registered office address 78 Sir John Rogerson’s Quay, Dublin 2. Registered number 49934. T: +353 (0)1 776 3000. F: +353 (0)1 776 3300. Web: ssga.com.

Israel: No action has been taken or will be taken in Israel that would permit a public offering of the Securities or distribution of this sales brochure to the public in Israel. This sales brochure has not been approved by the Israel Securities Authority (the ‘ISA’). Accordingly, the Securities shall only be sold in Israel to an investor of the type listed in the First Schedule to the Israeli Securities Law, 1978, which has confirmed in writing that it falls within one of the categories listed therein (accompanied by external confirmation where this is required under ISA guidelines), that it is aware of the implications of being considered such an investor and consents thereto, and further that the Securities are being purchased for its own account and not for the purpose of re-sale or distribution. This sales brochure may not be reproduced or used for any other purpose, nor be furnished to any other person other than those to whom copies have been sent. Nothing in this sales brochure should be considered investment advice or investment marketing as defined in the Regulation of Investment Advice, Investment Marketing and Portfolio Management Law, 1995 (“the Investment Advice Law”). Investors are encouraged to seek competent investment advice from a locally licensed investment advisor prior to making any investment. State Street is not licenced under the Investment Advice Law, nor does it carry the insurance as required of a licencee thereunder.

This sales brochure does not constitute an offer to sell or solicitation of an offer to buy any securities other than the Securities offered hereby, nor does it constitute an offer to sell to or solicitation of an offer to buy from any person or persons in any state or other jurisdiction in which such offer or solicitation would be unlawful, or in which the person making such offer or solicitation is not qualified to do so, or to a person or persons to whom it is unlawful to make such offer or solicitation.

Italy: State Street Global Advisors Europe Limited, Italy Branch (“State Street Global Advisors Italy”) is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. State Street Global Advisors Italy is registered in Italy with company number 11871450968 — REA: 2628603 and VAT number 11871450968, and its office is located at Via Ferrante Aporti, 10 - 20125 Milan, Italy. T: +39 02 32066 100. F: +39 02 32066 155.

For Investors in Luxembourg: The Companies have been notified to the Commission de Surveillance du Secteur Financier in Luxembourg in order to market its shares for sale to the public in Luxembourg and the Companies are notified Undertakings in Collective Investment for Transferable Securities (UCITS).

For Investors in the Netherlands: This communication is directed at qualified investors within the meaning of Section 2:72 of the Dutch Financial Markets Supervision Act (Wet op het financieel toezicht) as amended. The products and services to which this communication relates are only available to such persons and persons of any other description should not rely on this communication. Distribution of this document does not trigger a licence requirement for the Companies or SSGA in the Netherlands and consequently no prudential and conduct of business supervision will be exercised over the Companies or SSGA by the Dutch Central Bank (De Nederlandsche Bank N.V.) and the Dutch Authority for the Financial Markets (Stichting Autoriteit Financiële Markten). The Companies have completed their notification to the Authority Financial Markets in the Netherlands in order to market their shares for sale to the public in the Netherlands and the Companies are, accordingly, investment institutions (beleggingsinstellingen) according to Section 2:72 Dutch Financial Markets Supervision Act of Investment Institutions.

For Investors in Norway: The offering of SPDR ETFs by the Companies has been notified to the Financial Supervisory Authority of Norway (Finanstilsynet) in accordance with applicable Norwegian Securities Funds legislation. By virtue of a confirmation letter from the Financial Supervisory Authority dated 28 March 2013 (16 October 2013 for umbrella II) the Companies may market and sell their shares in Norway.

For Investors in Spain: SSGA SPDR ETFs Europe I and II plc have been authorized for public distribution in Spain and are registered with the Spanish Securities Market Commission (Comisión Nacional del Mercado de Valores) under no.1244 and no.1242. Before investing, investors may obtain a copy of the Prospectus and Key Information Documents, the Marketing Memoranda, the fund rules or instruments of incorporation as well as the annual and semi-annual reports of SSGA SPDR ETFs Europe I and II plc from Cecabank, S.A. Alcalá 27, 28014 Madrid (Spain) who is the Spanish Representative, Paying Agent and distributor in Spain or at ssga. com. The authorized Spanish distributor of SSGA SPDR ETFs is available on the website of the Securities Market Commission (Comisión Nacional del Mercado de Valores).

For Investors in Switzerland: This document is directed at qualified investors only, as defined Article 10(3) and (3ter) of the Swiss Collective Investment Schemes Act (“CISA”) and its implementing ordinance, at the exclusion of qualified investors with an opting-out pursuant to Art. 5(1) of the Swiss Federal Law on Financial Services (“FinSA”) and without any portfolio management or advisory relationship with a financial intermediary pursuant to Article 10(3ter) CISA (“Excluded Qualified Investors”). Certain of the funds may not be registered for public sale with the Swiss Financial Market Supervisory Authority (FINMA) which acts as supervisory authority in investment fund matters. Accordingly, the shares of those funds may only be offered to the aforementioned qualified investors and not be offered to any other investor in or from Switzerland. Before investing please read the prospectus and the KID. In relation to those funds which are registered with FINMA or have appointed a Swiss Representative and Paying Agent, prospective investors may obtain the current sales prospectus, the articles of incorporation, the KIDs as well as the latest annual and semi-annual reports free of charge from the Swiss Representative and Paying Agent, State Street Bank International GmbH, Munich, Zurich Branch, Kalanderplatz 5, 8045 Zürich, or at www.ssga.com, as well as from the main distributor in Switzerland, State Street Global Advisors AG (“SSGA AG”), Kalanderplatz 5, 8045 Zürich. For information and documentation regarding all other funds, please visit www.ssga.com or contact SSGA AG.

United Kingdom: In the UK, this document has been issued by State Street Global Advisors Limited (“SSGAL”). Authorized and regulated by the Financial Conduct Authority, Registered No.2509928. VAT No. 5776591 81. Registered office: 20 Churchill Place, Canary Wharf, London, E14 5HJ. T: 020 3395 6000. F: 020 3395 6350. Web: ssga.com.

Investing involves risk including the risk of loss of principal. The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA’s express written consent.

The trademarks and service marks referenced herein are the property of their respective owners. Third party data providers make no warranties or representations of any kind relating to the accuracy, completeness or timeliness of the data and have no liability for damages of any kind relating to the use of such data.

Diversification does not ensure a profit or guarantee against loss.

The information provided does not constitute investment advice as such term is defined under the Markets in Financial Instruments Directive (2014/65/ EU) or applicable Swiss regulation and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell any investment. It does not take into account any investor’s or potential investor’s particular investment objectives, strategies, tax status, risk appetite or investment horizon. If you require investment advice you should consult your tax and financial or other professional advisor.

All information is from SSGA unless otherwise noted and has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such. All the index performance results referred to are provided exclusively for comparison purposes only. It should not be assumed that they represent the performance of any particular investment.

ETFs trade like stocks, are subject to investment risk and will fluctuate in market value.

The investment return and principal value of an investment will fluctuate in value, so that when shares are sold or redeemed, they may be worth more or less than when they were purchased. Although shares may be bought or sold on an exchange through any brokerage account, shares are not individually redeemable from the fund. Investors may acquire shares and tender them for redemption through the fund in large aggregations known as “creation units.” Please see the fund’s prospectus for more details.

The stocks mentioned are not necessarily holdings invested in by SSGA. References to specific company stocks should not be construed as recommendations or investment advice. The statements and opinions are subject to change at any time, based on market and other conditions.

Concentrated investments in a particular sector or industry tend to be more volatile than the overall market and increases risk that events negatively affecting such sectorsor industries could reduce returns, potentially causing the value of the Fund’s shares to decrease. Select Sector SPDR Funds bear a higher level of risk than more broadly diversified funds.

All ETFs are subject to risk, including the possible loss of principal. Sector ETFs products are also subject to sector risk and nondiversification risk, which generally results in greater price fluctuations than the overall market.

Equity securities may fluctuate in value and can decline significantly in response to the activities of individual companies and general market and economic conditions.

Investing in foreign domiciled securities may involve risk of capital loss from unfavourable fluctuation in currency values, withholding taxes, from differences in generally accepted accounting principles or from economic or political instability in other nations.

The views expressed in this material are the views of the SPDR EMEA Strategy & Research Team through the period ended 02 October 2025 and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.

This information should not be considered a recommendation to invest in a particular sector or to buy or sell any security shown. It is not known whether the sectors or securities shown will be profitable in the future.

The S&P 500® Index is a product of S&P Dow Jones Indices LLC or its affiliates (“S&P DJI”) and have been licensed for use by State Street Global Advisors. S&P®, SPDR®, S&P 500®, US 500 and the 500 are trademarks of Standard & Poor’s Financial Services LLC (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”) and has been licensed for use by S&P Dow Jones Indices; and these trademarks have been licensed for use by S&P DJI and sublicensed for certain purposes by State Street Global Advisors. The fund is not sponsored, endorsed, sold or promoted by S&P DJI, Dow Jones, S&P, their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of these indices. SPDR ETFs is the exchange traded funds (“ETF”) platform of State Street Global Advisors and is comprised of funds that have been authorised by Central Bank of Ireland as open-ended UCITS investment companies. SSGA SPDR ETFs Europe I & SPDR ETFs Europe II plc issue SPDR ETFs, and is an open-ended investment company with variable capital having segregated liability between its sub-funds. The Company is organized as an Undertaking for Collective Investments in Transferable Securities (UCITS) under the laws of Ireland and authorized as a UCITS by the Central Bank of Ireland.

The information contained in this communication is not a research recommendation or ‘investment research’ and is classified as a ‘Marketing Communication’ in accordance with the applicable regional regulation. This means that this marketing communication (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research (b) is not subject to any prohibition on dealing ahead of the dissemination of investment research. Please refer to the Fund’s latest Key Information Document (KID)/Key Investor Information Document (KIID) and Prospectus before making any final investment decision. The latest English version of the prospectus and the KID/KIID can be found at ssga.com. A summary of investor rights can be found here: https://ssga.com/library-content/ products/fund-docs/summary-ofinvestor-rights/ssga-investorsrights-summary-template-non-etfLux.pdf.

Note that the Management Company may decide to terminate the arrangements made for marketing and proceed with de-notification in compliance with Article 93a of Directive 2009/65/EC. Note that the Management Company may decide to terminate the arrangements made for marketing and proceed with de-notification in compliance with Article 93a of Directive 2009/65/EC.

Investments in emerging or developing markets may be more volatile and less liquid than investing in developed markets and may involve exposure to economic structures that are generally less diverse and mature and to political systems which have less stability than those of more developed countries.

Bonds generally present less short-term risk and volatility than stocks, but contain interest rate risk (as interest rates rise, bond prices usually fall); issuer default risk; issuer credit risk; liquidity risk; and inflation risk. These effects are usually pronounced for longer-term securities. Any fixed income security sold or redeemed prior to maturity may be subject to a substantial gain or loss. There are risks associated with investing in Real Assets and the Real Assets sector, including real estate, precious metals and natural resources. Investments can be significantly affected by events relating to these industries.

Investing in REITs involves certain distinct risks in addition to those risks associated with investing in the real estate industry in general. Equity REITs may be affected by changes in the value of the underlying property owned by the REITs, while mortgage REITs may be affected by the quality of credit extended. REITs are subject to heavy cash flow dependency, default by borrowers and selfliquidation. REITs, especially mortgage REITs, are also subject to interest rate risk (i.e., as interest rates rise, the value of the REIT may decline). Investments in mid/ small-sized companies may involve greater risks than in those of larger, better known companies. Investing in foreign domiciled securities may involve risk of capital loss from unfavorable fluctuation in currency values, withholding taxes, from differences in generally accepted accounting principles or from economic or political instability in other nations.

The returns on a portfolio of securities which exclude companies that do not meet the portfolio’s sustainable strategy criteria may trail the returns on a portfolio of securities which include such companies. A portfolio’s sustainable strategy criteria may result in the portfolio investing in industry sectors or securities which underperform the market as a whole.

The Fund/share class may use financial derivatives instruments for currency hedging and to manage the portfolio efficiently. The Fund may purchase securities that are not denominated in the share class currency. Hedging should mitigate the impact of exchange rate fluctuations however hedges are sometimes subject to imperfect matching which could generate losses. © 2025 State Street Corporation. All Rights Reserved.

1990314.107.1.EMEA.INST

Exp. Date: 31 January 2026

More on Equity Investing

View all equity investing insights