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Our base case is for modest economic growth and inflation calm enough to allow for a resumption of interest-rate cuts. In this environment, we expect decent returns from bonds and even better performance from stocks, especially in regions outside North America where valuations are relatively appealing.

Economy

  • U.S. public policy remains the dominant macroeconomic theme, with tariffs and tax cuts both attracting close attention.

  • The global economy has been resilient in the face of protectionism but some areas of the economy have begun to soften modestly, including the labour market.

  • Inflation resulting from President Trump’s tariffs is becoming visible although the net effect of tariffs on inflation may be somewhat smaller than initially expected.

  • We believe a U.S. recession remains unlikely, and our global growth forecasts are flat to slightly higher than a quarter ago.

RBC GAM GDP forecast for developed markets

RBC GAM GDP forecast for developed markets

Note: As of August 29, 2025. Source: RBC GAM

Fixed Income

  • The Fed is on the cusp of resuming interest-rate cuts to support the labour market even as inflation remains slightly above target.

  • The U.S. 10-year yield at 4.2% is attractive and situated above modelled equilibrium if inflation does not return with force.

  • Our model indicates that the current real yield is about 70 basis points above normal given longer-term structural factors.

  • We can expect 10-year Treasury bonds to deliver returns in the mid single digits over the year ahead, with minimal valuation risk, in addition to providing critical ballast against equity-market volatility in the context of a balanced portfolio.

U.S. 10-year T-bond yield

Equilibrium range
US 10 year T bond yield

Note: As of August 29, 2025. Source: RBC GAM

Equity Markets

  • Global equities soared to records, extending their impressive rebound from earlier this year, with broad participation from international stocks.

  • U.S. large-cap stocks, Canadian equities and Japanese equities are fully valued, but stocks in Europe, the UK and emerging markets appear to be attractively priced.

  • Although valuations are elevated in the highly concentrated U.S. large-cap equity market, the ultimate driver of a sustained advance in stocks is corporate-profit growth, and earnings have been much better than expected.

  • If profits continue to meet or even exceed analysts’ expectations, the rally could have further room to go but heightened valuations may limit the magnitude of any future gains.

Global stock-market composite

Equity-market indices relative to equilibrium
Global stock market composite

Note: As of August 31, 2025. Source: RBC GAM

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Disclosure
This material is provided by RBC Global Asset Management (RBC GAM) for informational purposes only and may not be reproduced, distributed or published without the written consent of RBC GAM or its affiliated entities listed herein. This material does not constitute an offer or a solicitation to buy or to sell any security, product or service in any jurisdiction; nor is it intended to provide investment, financial, legal, accounting, tax, or other advice and such information should not be relied or acted upon for providing such advice. This material is not available for distribution to investors in jurisdictions where such distribution would be prohibited.

RBC GAM is the asset management division of Royal Bank of Canada (RBC) which includes RBC Global Asset Management Inc. (RBC GAM Inc.), RBC Global Asset Management (U.S.) Inc. (RBC GAM-US), RBC Global Asset Management (UK) Limited (RBC GAM-UK), and RBC Global Asset Management (Asia) Limited (RBC GAM-Asia), which are separate, but affiliated subsidiaries of RBC.

In Canada, this material is provided by RBC GAM Inc. (including PH&N Institutional), each of which is regulated by each provincial and territorial securities commission with which it is registered. In the United States, this material is provided by RBC GAM-US, a federally registered investment adviser. In Europe this material is provided by RBC GAM-UK, which is authorised and regulated by the UK Financial Conduct Authority. In Asia, this material is provided by RBC GAM-Asia, which is registered with the Securities and Futures Commission (SFC) in Hong Kong.

Additional information about RBC GAM may be found at www.rbcgam.com.

This material has not been reviewed by, and is not registered with any securities or other regulatory authority, and may, where appropriate and permissible, be distributed by the above-listed entities in their respective jurisdictions.

Any investment and economic outlook information contained in this material has been compiled by RBC GAM from various sources. Information obtained from third parties is believed to be reliable, but no representation or warranty, express or implied, is made by RBC GAM, its affiliates or any other person as to its accuracy, completeness or correctness. RBC GAM and its affiliates assume no responsibility for any errors or omissions in such information.

Opinions contained herein reflect the judgment and thought leadership of RBC GAM and are subject to change at any time. Such opinions are for informational purposes only and are not intended to be investment or financial advice and should not be relied or acted upon for providing such advice. RBC GAM does not undertake any obligation or responsibility to update such opinions.

RBC GAM reserves the right at any time and without notice to change, amend or cease publication of this information.

Past performance is not indicative of future results. With all investments there is a risk of loss of all or a portion of the amount invested. Where return estimates are shown, these are provided for illustrative purposes only and should not be construed as a prediction of returns; actual returns may be higher or lower than those shown and may vary substantially, especially over shorter time periods. It is not possible to invest directly in an index.

Some of the statements contained in this material may be considered forward-looking statements which provide current expectations or forecasts of future results or events. Forward-looking statements are not guarantees of future performance or events and involve risks and uncertainties. Do not place undue reliance on these statements because actual results or events may differ materially from those described in such forward-looking statements as a result of various factors. Before making any investment decisions, we encourage you to consider all relevant factors carefully.

® / TM Trademark(s) of Royal Bank of Canada. Used under licence.

© RBC Global Asset Management Inc., 2025
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