Global Market Pulse (EURO)
Leveraging expertise from the MFS Market Insights team to provide timely perspectives on economic and market dynamics that are top of mind for clients.
Market Insights Team
KEY TAKEAWAYS
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Economy & Markets
Economy & Markets
| US Consumer
A resilient consumer bodes well for the global economy MFS PERSPECTIVE
- Revolving consumer credit, in nominal terms, rapidly increased post-COVID due to higher credit card usage.
- However, the low household debt service ratio indicates that consumers have been able to service debt payments while maintaining spending, thanks to higher wages.
- Typically, a robust US economy depends on the strength of the consumer.
| The US Dollar
US exceptionalism is being challenged MFS PERSPECTIVE
- The dollar has fallen victim to a US policy credibility shock. Global investors appear to be diversifying away from US assets.
- Looking ahead, we see a case for being bearish on the USD at a strategic level, mainly reflecting global allocation shifts.
- In our view, non-USD assets are well positioned.
| Energy prices
Lower energy costs may help them to withstand US tariffs MFS PERSPECTIVE
- Tariff-related global growth concerns, rising OPEC+ production caps and hopes that sanctions on Iran may be lifted have helped push down oil prices.
- Lower prices should cool inflation, offset some of the tariff drag on growth and lower input costs.
- The EU and Japan import over 95% of their oil consumption.
| European Equities
European stocks offering attractive relative valuations MFS PERSPECTIVE
- European stocks continue to trade at a significant discount to those in the US, though the still-large valuation gap has narrowed recently.
- Structural shifts driven by recent policy changes may see this gap close further.
- Revolving consumer credit, in nominal terms, rapidly increased post-COVID due to higher credit card usage.
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Global Developed Equity
Global Developed Equity - US
Euro basedUS 
• UNDERWEIGHT • NEUTRAL • OVERWEIGHT
- Equity markets are pricing in a reversal of tariffs, with the S&P 500 close to levels seen prior to April 2. Despite easing concerns, overall tariff rates remain historically high.
- While US investors have piled into US equity funds, non-US investors have reallocated into non-US markets amid uncertainty, US growth concerns and cheaper valuations.
- The combination of worsening sentiment, high valuations and reactive policy changes poses risks to the market.
- Investors should prioritize companies with strong pricing power, solid balance sheets and operational flexibility.
MFS CONSIDERATIONS LARGE CAP - Tech giants continue to signal plans to boost AI capex, easing concerns about reduced hardware demand.
- Valuations remain above long-term averages and face pressure from concerns about growth and inflation.
- Roughly 40% of S&P 500 companieshave significant international revenue and are likely to benefit from a weakening USD.
SMALL/MID CAP - Continued market broadening should be supportive for SMID, but a higher-forlonger inflation and rates environment remains a headwind.
- Valuations signal a favorable entry point, but elevated economic uncertainty suggests exercising caution.
- We favor midcaps over small caps given their lower financial leverage and stronger profit margins.
GROWTH - While a rebound in mega-cap stocks boosted returns, Russell 1000® Growth has underperformed Russell 1000® Value.
- Valuations have rerated and are well below prior peaks though still above the long-term average.
- The gap in earnings growth between the Magnificent Seven and the rest of the Russell 1000® Growth index has narrowed.
VALUE - Value trades at a deep discount to Growth and well below the relative forward P/E long-term average.
- Value stocks generally have higher fixed costs and fewer variable costs, making them less susceptible to inflation volatility.
- Consistent, higher dividend-paying stocks tend to be a better inflation hedge.
Global Developed Equity - Ex US
Euro based• UNDERWEIGHT • NEUTRAL • OVERWEIGHT
EUROPE EX UK 
- European equities are trading at a deep discount to the US, providing a good relative entry point.
- Value sectors have outperformed year-to-date, with financials, communication services, and utilities up 20%+.
M F S C O N S I D E R A T I O N S - The ECB is expected to continue easing monetary policy, a tailwind for European companies.
- Sentiment toward Europe has improved as it aims at becoming self-reliant on defense.
UK
- Tariff uncertainties have been reduced after the UK secured a US trade deal.
- Similarly, the UK and the EU reached an agreement to reset post-Brexit relations, removing some trade barriers while partnering on defense.
M F S C O N S I D E R A T I O N S - Very cheap valuations may provide a favorable entry point for UK equities.
- The UK market’s tilt toward value-oriented sectors proved to be a tailwind amid market volatility.
JAPAN 
- Corporate reform, the reappearance of inflation and improved profit margins remain supportive.
- However, trade uncertainty creates near-term challenges, with reduced demand from China a headwind.
M F S C O N S I D E R A T I O N S - The pace of monetary policy normalization has likely slowed.
- A weaker USD and lower oil prices are a tailwind for importers and Japanese assets.
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Emerging Markets
Emerging Markets
Euro based• UNDERWEIGHT • NEUTRAL • OVERWEIGHT
EM EQUITY
- De-escalation in the US-China trade war, along with China’s policy easing, offer some respite for EM.
- Year to date, the MSCI EM index has outperformed the MSCI World index.
- Valuations appear relatively attractive.
M F S C O N S I D E R A T I O N S - Taiwanese semiconductor companies saw strong demand in Q1, reducing concerns over declining demand for AI infrastructure.
- Tariff uncertainty remains elevated as progress toward trade deals remains muted.
EM DEBT - HARD CURRENCY
- Despite tight spreads, the valuation backdrop remains favorable on a total-yield basis.
- Watch for the impact of global risks, ranging from Trump 2.0 and geopolitics, to China’s structural headwinds.
M F S C O N S I D E R A T I O N S - Contrary to initial concerns, EM debt has shown remarkable resilience since the US election.
- EMD remains attractive amid compelling total yield valuations.
- However, given significant risks, country selection will be key.
EM DEBT - LOCAL CURRENCY 
- Global policy easing, progress towards disinflation and relatively high real rates are positive drivers.
- Sensitive to macro shifts, EMFX has weakened against the EUR after the recent eurozone fiscal moves.
M F S C O N S I D E R A T I O N S - A more tactical asset class given its higher volatility, reflecting the currency risk. Recent increases in the euro leave us cautious for now.
- High local rates and fading EM inflation impulse will provide a buffer to currency volatility.
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Global Fixed Income
Global Fixed Income
Euro based• UNDERWEIGHT • NEUTRAL • OVERWEIGHT
USD DURATION 
- While slowing growth and decelerating inflation have been supportive, concerns over fiscal policy and deteriorating technicals have reinforced the upside risks to rates.
- Potential inflationary pressures from tax cuts and tariffs are tying the Fed’s hands for now.
MFS CONSIDERATIONS - Policy risks and the weaker demand for Treasuries warrants some caution, in our view.
- Should the growth outlook deteriorate, the Fed will likely resume easing, a tailwind for duration.
EURO DURATION* 
- Modifications to the German debt brake sent bund yields up on expectations of higher growth and issuance.
- Meanwhile, the ECB remains committed to further easing, which is supportive.
- On the valuation front, yields have risen but are short of compelling entry levels.
M F S C O N S I D E R A T I O N S - We have turned tactically neutral, reflecting mixed macro and valuation factors.
- The case for being strategically long duration in Europe remains solid, especially if the ECB cuts rates further.
US IG CORP
- US Corporate fundamentals remain respectable after recent margin and free cash flow improvements.
- Spreads have recovered most of their post- Liberation Day widening move.
- Total yield valuation is quite compelling.
M F S C O N S I D E R A T I O N S - The outlook for total returns remains constructive.
- Given a macro backdrop of uncertainty, we have moved to neutral on US IG with an up-in-quality bias versus higher beta asset classes.
US HIGH YIELD
- Fundamentals are robust, helped by historically low levels of leverage and strong free cash flow generation.
- Other positive drivers include low default rate projections, attractive breakeven yield valuation and a supportive macro outlook.
M F S C O N S I D E R A T I O N S - The risk/reward may be attractive for investors who can consider deploying credit risk exposure.
- While we are not concerned about the maturity wall, spread valuation looks stretched, so security selection is key.
EURO IG CORP
- Sound fundamentals and robust technicals are supportive of tight valuations.
- Europe’s fiscal expansion should benefit sectors such as defense and utilities.
- Continued ECB cuts should create a supportive macro environment.
M F S C O N S I D E R A T I O N S - While yield valuations remain compelling, spreads have tightened recently and are close to their US counterparts, diminishing their relative appeal.
EURO HIGH YIELD
- The macro backdrop and strong fundamentals, including favorable net leverage, are supportive.
- Breakeven yields remain attractive.
- Appetite for riskier assets in the region is likely to benefit from the ongoing ECB easing cycle.
M F S C O N S I D E R A T I O N S - The asset class has shown resilience and remains attractive for the investor with high risk tolerance.
- Security selection remains key given the dispersion of fundamental stories at the issuer level.
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The Global Market Pulse leverages the firm’s intellectual capital to provide perspective on broad market dynamics that are top of mind for asset allocators. We celebrate the rich diversity of opinion within our investment team and are proud to have talented investors who may implement portfolio positions and express different or nuanced views to those contained here, which are aligned to their specific investment philosophy, risk budget and entrusted duty to allocate our client’s capital responsibly.
The views expressed herein are those of the MFS Strategy and Insights Group within the MFS distribution unit and may differ from those of MFS portfolio managers and research analysts. These views are subject to change at any time and should not be construed as MFS’ investment advice, as portfolio positioning, as securities recommendations, or as an indication of trading intent on behalf of MFS.
Index data source: MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed or produced by MSCI.
Frank Russell Company ("Russell") is the source and owner of the Russell Index data contained or reflected in this material and all trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Frank Russell Company. Neither Russell nor its licensors accept any liability for any errors or omissions in the Russell Indexes and/or Russell ratings or underlying data and no party may rely on any Russell Indexes and/or Russell ratings and/or underlying data contained in this communication. No further distribution of Russell Data is permitted without Russell's express written consent. Russell does not promote, sponsor or endorse the content of this communication.
“Standard & Poor’s®” and S&P “S&P®” are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”) and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”) and have been licensed for use by S&P Dow Jones Indices LLC and sublicensed for certain purposes by MFS. The S&P 500® is a product of S&P Dow Jones Indices LLC, and has been licensed for use by MFS. MFS’ Products are not sponsored, endorsed, sold or promoted by S&P Dow Jones Indices LLC, Dow Jones, S&P, or their respective affiliates, and neither S&P Dow Jones Indices LLC, Dow Jones, S&P, their respective affiliates make any representation regarding the advisability of investing in such products. BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). Bloomberg or Bloomberg’s licensors own all proprietary rights in the Bloomberg Indices. Bloomberg neither approves or endorses this material, or guarantees the accuracy or completeness of any information herein, or makes any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith The views expressed are subject to change at any time.
These views should not be relied upon as investment advice, as portfolio positioning, as securities, recommendations or as an indication of trading intent on behalf of the advisor. No forecasts can be guaranteed.
Economy & Markets
| US Consumer
| A resilient consumer bodes well for the global economy |
MFS PERSPECTIVE
|
| The US Dollar
| US exceptionalism is being challenged |
MFS PERSPECTIVE
|
| Energy prices
| Lower energy costs may help them to withstand US tariffs |
MFS PERSPECTIVE
|
| European Equities
| European stocks offering attractive relative valuations |
MFS PERSPECTIVE
|
Global Developed Equity - US
Euro based
| US |
• UNDERWEIGHT • NEUTRAL • OVERWEIGHT
|
| MFS CONSIDERATIONS |
| LARGE CAP |
|
| SMALL/MID CAP |
|
| GROWTH |
|
| VALUE |
|
Global Developed Equity - Ex US
Euro based
• UNDERWEIGHT • NEUTRAL • OVERWEIGHT
| EUROPE EX UK |
- European equities are trading at a deep discount to the US, providing a good relative entry point.
- Value sectors have outperformed year-to-date, with financials, communication services, and utilities up 20%+.
| M F S C O N S I D E R A T I O N S |
- The ECB is expected to continue easing monetary policy, a tailwind for European companies.
- Sentiment toward Europe has improved as it aims at becoming self-reliant on defense.
| UK |
- Tariff uncertainties have been reduced after the UK secured a US trade deal.
- Similarly, the UK and the EU reached an agreement to reset post-Brexit relations, removing some trade barriers while partnering on defense.
| M F S C O N S I D E R A T I O N S |
- Very cheap valuations may provide a favorable entry point for UK equities.
- The UK market’s tilt toward value-oriented sectors proved to be a tailwind amid market volatility.
| JAPAN |
- Corporate reform, the reappearance of inflation and improved profit margins remain supportive.
- However, trade uncertainty creates near-term challenges, with reduced demand from China a headwind.
| M F S C O N S I D E R A T I O N S |
- The pace of monetary policy normalization has likely slowed.
- A weaker USD and lower oil prices are a tailwind for importers and Japanese assets.
Emerging Markets
Euro based
• UNDERWEIGHT • NEUTRAL • OVERWEIGHT
| EM EQUITY |
- De-escalation in the US-China trade war, along with China’s policy easing, offer some respite for EM.
- Year to date, the MSCI EM index has outperformed the MSCI World index.
- Valuations appear relatively attractive.
| M F S C O N S I D E R A T I O N S |
- Taiwanese semiconductor companies saw strong demand in Q1, reducing concerns over declining demand for AI infrastructure.
- Tariff uncertainty remains elevated as progress toward trade deals remains muted.
| EM DEBT - HARD CURRENCY |
- Despite tight spreads, the valuation backdrop remains favorable on a total-yield basis.
- Watch for the impact of global risks, ranging from Trump 2.0 and geopolitics, to China’s structural headwinds.
| M F S C O N S I D E R A T I O N S |
- Contrary to initial concerns, EM debt has shown remarkable resilience since the US election.
- EMD remains attractive amid compelling total yield valuations.
- However, given significant risks, country selection will be key.
| EM DEBT - LOCAL CURRENCY |
- Global policy easing, progress towards disinflation and relatively high real rates are positive drivers.
- Sensitive to macro shifts, EMFX has weakened against the EUR after the recent eurozone fiscal moves.
| M F S C O N S I D E R A T I O N S |
- A more tactical asset class given its higher volatility, reflecting the currency risk. Recent increases in the euro leave us cautious for now.
- High local rates and fading EM inflation impulse will provide a buffer to currency volatility.
BLANK
Global Fixed Income
Euro based
• UNDERWEIGHT • NEUTRAL • OVERWEIGHT
| USD DURATION |
- While slowing growth and decelerating inflation have been supportive, concerns over fiscal policy and deteriorating technicals have reinforced the upside risks to rates.
- Potential inflationary pressures from tax cuts and tariffs are tying the Fed’s hands for now.
| MFS CONSIDERATIONS |
- Policy risks and the weaker demand for Treasuries warrants some caution, in our view.
- Should the growth outlook deteriorate, the Fed will likely resume easing, a tailwind for duration.
| EURO DURATION* |
- Modifications to the German debt brake sent bund yields up on expectations of higher growth and issuance.
- Meanwhile, the ECB remains committed to further easing, which is supportive.
- On the valuation front, yields have risen but are short of compelling entry levels.
| M F S C O N S I D E R A T I O N S |
- We have turned tactically neutral, reflecting mixed macro and valuation factors.
- The case for being strategically long duration in Europe remains solid, especially if the ECB cuts rates further.
| US IG CORP |
- US Corporate fundamentals remain respectable after recent margin and free cash flow improvements.
- Spreads have recovered most of their post- Liberation Day widening move.
- Total yield valuation is quite compelling.
| M F S C O N S I D E R A T I O N S |
- The outlook for total returns remains constructive.
- Given a macro backdrop of uncertainty, we have moved to neutral on US IG with an up-in-quality bias versus higher beta asset classes.
| US HIGH YIELD |
- Fundamentals are robust, helped by historically low levels of leverage and strong free cash flow generation.
- Other positive drivers include low default rate projections, attractive breakeven yield valuation and a supportive macro outlook.
| M F S C O N S I D E R A T I O N S |
- The risk/reward may be attractive for investors who can consider deploying credit risk exposure.
- While we are not concerned about the maturity wall, spread valuation looks stretched, so security selection is key.
| EURO IG CORP |
- Sound fundamentals and robust technicals are supportive of tight valuations.
- Europe’s fiscal expansion should benefit sectors such as defense and utilities.
- Continued ECB cuts should create a supportive macro environment.
| M F S C O N S I D E R A T I O N S |
- While yield valuations remain compelling, spreads have tightened recently and are close to their US counterparts, diminishing their relative appeal.
| EURO HIGH YIELD |
- The macro backdrop and strong fundamentals, including favorable net leverage, are supportive.
- Breakeven yields remain attractive.
- Appetite for riskier assets in the region is likely to benefit from the ongoing ECB easing cycle.
| M F S C O N S I D E R A T I O N S |
- The asset class has shown resilience and remains attractive for the investor with high risk tolerance.
- Security selection remains key given the dispersion of fundamental stories at the issuer level.
BLANK
The Global Market Pulse leverages the firm’s intellectual capital to provide perspective on broad market dynamics that are top of mind for asset allocators. We celebrate the rich diversity of opinion within our investment team and are proud to have talented investors who may implement portfolio positions and express different or nuanced views to those contained here, which are aligned to their specific investment philosophy, risk budget and entrusted duty to allocate our client’s capital responsibly.
The views expressed herein are those of the MFS Strategy and Insights Group within the MFS distribution unit and may differ from those of MFS portfolio managers and research analysts. These views are subject to change at any time and should not be construed as MFS’ investment advice, as portfolio positioning, as securities recommendations, or as an indication of trading intent on behalf of MFS.
Index data source: MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed or produced by MSCI.
Frank Russell Company ("Russell") is the source and owner of the Russell Index data contained or reflected in this material and all trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Frank Russell Company. Neither Russell nor its licensors accept any liability for any errors or omissions in the Russell Indexes and/or Russell ratings or underlying data and no party may rely on any Russell Indexes and/or Russell ratings and/or underlying data contained in this communication. No further distribution of Russell Data is permitted without Russell's express written consent. Russell does not promote, sponsor or endorse the content of this communication.
“Standard & Poor’s®” and S&P “S&P®” are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”) and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”) and have been licensed for use by S&P Dow Jones Indices LLC and sublicensed for certain purposes by MFS. The S&P 500® is a product of S&P Dow Jones Indices LLC, and has been licensed for use by MFS. MFS’ Products are not sponsored, endorsed, sold or promoted by S&P Dow Jones Indices LLC, Dow Jones, S&P, or their respective affiliates, and neither S&P Dow Jones Indices LLC, Dow Jones, S&P, their respective affiliates make any representation regarding the advisability of investing in such products. BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). Bloomberg or Bloomberg’s licensors own all proprietary rights in the Bloomberg Indices. Bloomberg neither approves or endorses this material, or guarantees the accuracy or completeness of any information herein, or makes any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith The views expressed are subject to change at any time.
These views should not be relied upon as investment advice, as portfolio positioning, as securities, recommendations or as an indication of trading intent on behalf of the advisor. No forecasts can be guaranteed.