Structural Drivers Reshaping Global Stock Market Valuations: A 2025–2035 Outlook

The global stock market is entering a decade of profound transformation, driven by structural forces that will redefine valuation dynamics, sectoral performance, and geographic allocations. From 2025 to 2035, artificial intelligence (AI), trade policy realignments, and monetary policy shifts will act as compounding catalysts, reshaping earnings growth, price-to-earnings (P/E) ratios, and the dispersion of returns across industries. Investors must navigate these forces with a nuanced understanding of their interplay and long-term implications.

AI: The Double-Edged Sword of Productivity and Valuation

Artificial intelligence is emerging as the most disruptive force in global markets. By 2025, AI-driven productivity gains have already begun to elevate earnings for tech giants and semiconductor firms. For instance, NVIDIA's data center revenue surged 142% year-over-year in fiscal 2025, with projections suggesting $300 billion in revenue by 2026, according to
a Markets FinancialContent article. Similarly, Broadcom's AI segment contributed $5.2 billion to its Q3 2025 revenue, driven by a $10 billion order from a major client, as noted in that Markets FinancialContent article. These gains are translating into elevated P/E ratios for AI leaders, with the S&P 500's AI-exposed firms trading at a 30% premium to the index average, according to a
Northern Trust analysis.

However, the AI boom is not without risks. A 2025 MIT study warns that 95% of corporate AI spending has yet to deliver measurable returns, raising concerns about overvaluation; this risk was also highlighted in the earlier Markets FinancialContent article. Furthermore, AI's energy demands—projected to require 123 gigawatts of power by 2035—pose infrastructure and environmental challenges, particularly for data centers and utilities, a point underscored in the Northern Trust analysis. While AI could boost global GDP by 15% over the next decade, according to
PwC, its uneven adoption across sectors and geographies will likely widen valuation disparities.

Trade Policies: Fragmentation and Sectoral Rebalancing

Trade policy shifts, particularly U.S. tariffs and reshoring initiatives, are accelerating global supply chain realignments. The implementation of a universal 10% tariff in April 2025 has already disrupted manufacturing and consumer goods sectors, with companies like Ford and Rivian withdrawing financial guidance due to trade uncertainty, as reported in
a TalkMarkets article. Conversely, European and emerging market equities have outperformed U.S. large-cap stocks in 2025, driven by stronger fiscal policies and diversified supply chains, according to
an Arc Group report.

The OECD projects global economic growth to slow from 3.3% in 2024 to 2.9% in 2025 and 2026, with trade fragmentation exacerbating sectoral volatility, as discussed in
a McKinsey analysis. For example, the automotive and electronics industries face a 60% increase in tariffs between advanced economies and China, while emerging economies may see trade growth resilient to fragmentation, a dynamic the McKinsey analysis highlights. This divergence is likely to amplify sectoral dispersion, with AI-driven tech firms benefiting from innovation hubs in Europe and Asia, while traditional exporters in Germany and Mexico face margin pressures, per the Arc Group report.

Monetary Policy: Dovish Stimulus and Sectoral Winners

Monetary policy is another critical lever shaping valuation dynamics. The Federal Reserve's dovish stance in 2025–2027, including anticipated rate cuts, is expected to buoy rate-sensitive sectors like real estate and small-cap stocks. The Russell 2000 index, for instance, has gained 12% year-to-date in 2025, outperforming the S&P 500, as reported in the TalkMarkets article. In contrast, European central banks, particularly the ECB, are likely to adopt a more cautious approach, balancing inflationary pressures with fiscal stimulus measures—a cautionary view echoed by the Arc Group report.

Goldman Sachs estimates that AI-driven productivity gains could elevate the S&P 500's compound annual earnings growth to 5.4% over 20 years, compared to 4.9% currently, implying a 9% higher fair value for the index, according to a
Goldman Sachs analysis. However, this optimism hinges on sustained AI investment and manageable inflation. If Big Tech's AI spending slows, the S&P 500's valuation multiple could contract by 20%, a downside scenario Goldman Sachs highlights.

Valuation Metrics and Sectoral Dispersion: A 2025–2035 Forecast

The interplay of these structural drivers will likely result in stark valuation divergences. By 2035:
- AI-Driven Sectors: Technology, semiconductors, and AI infrastructure are projected to see P/E ratios 40–60% above the market average, driven by earnings growth of 10–15% annually, a range cited in the Northern Trust analysis.
- Trade-Exposed Sectors: Automotive, consumer goods, and manufacturing may trade at a 20–30% discount to the market, with earnings growth constrained by tariffs and supply chain costs, as discussed in the McKinsey analysis.
- Monetary Policy Winners: Real estate, utilities, and small-cap stocks could see P/E expansions of 15–25% due to lower borrowing costs and cyclical demand, a scenario outlined in the TalkMarkets article.

Strategic Implications for Investors

Investors must adopt a dual strategy:
1. Diversification: Allocate across geographies (e.g., European and Chinese tech) and sectors (e.g., AI infrastructure, energy transition) to mitigate trade and policy risks, a recommendation consistent with the Arc Group report.
2. Active Monitoring: Track macroeconomic signals like inflation, tariff developments, and AI adoption rates to adjust portfolios dynamically, as advised in the McKinsey analysis.

The next decade will test the resilience of global markets. While AI and monetary stimulus offer growth tailwinds, trade fragmentation and valuation extremes pose significant risks. Success will belong to those who balance innovation bets with disciplined risk management.