How have the equity market’s risk and return dynamics changed in 2025?

key takeaways.

• At mid-year 2025, the equity market hierarchy has been upended, transforming former champions into laggards, and turning the outcasts from 2021-2024 into leading performers
• White House measures have amplified this rotation, but the most subtle effect concerns the risk-return relationship which, having inverted during the post-COVID period, is now normalising
• This change signals an improvement in market psychology and a healthier risk appetite, beyond mere geographical performance shifts.

So far this year, portfolio managers worldwide have faced a mini revolution, navigating a marked rotation between winners and losers in equity markets. The winners from the 2021-2024 period were clearly identified. In developed markets, US technology had dominated unchallenged, while India shone in the emerging universe. A portfolio concentrated in these segments would have performed wonderfully during this period. However, the winds have shifted since the start of this year. Initially, a rotation saw Europe take the lead and China emerge strongly from the Deepseek episode. White House measures subsequently played a catalytic role in the reorientation. 

This week, Simply put provides a mid-year assessment of Trump's impact on equity market leaders. We find that effects on the risk-return profile of markets (i.e. the higher the risk, the higher the reward, and vice versa) may have been profound but are also more subtle than they initially appear...

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