We released our 2025 Investment Outlook. Geopolitics and policy shifts are creating a more fragmented world, but new opportunities emerge in the global reordering.
Forecasts are based on information and policy measures available as of 6 November 2024.
We forecast global growth to soften at 3.0% in 2025 and 2026. The growth differential between Emerging and Developed Markets should also stabilise, with EM growing +3.9% and DM +1.6% over the next two years. We expect the US economy to mildly decelerate towards a soft landing; Europe’s recovery towards potential growth to be modest and progressive, and Asia to remain a major driver of growth, despite China’s slowdown.
Confirmation that disinflation is on track should support more dovish monetary policies. Central banks in the US and Europe should continue to cut rates. By end of 2025, we anticipate terminal interest rates to reach 3.5% in the US, 2.25% in the Eurozone, 3.50% in the UK. By contrast, Bank of Japan is anticipated to implement two more hikes. EM Central Banks intend to deploy more independent policies, easing gradually.
- The global economic outlook for 2025 still looks favourable for risk assets, but policy and geopolitical challenges are entrenched. Anomalies such as market concentration and excessive debt alongside this benign macro-outlook require greater and more nuanced portfolio diversification and dynamic allocation adjustments.
- Global growth is expected to stabilize at 3.0% in 2025 and 2026 as well as the growth differential between Developed and Emerging economies. Disinflation may persist, but inflation risks loom and the Fed may need to adapt to potential US policy shifts. A mild global easing cycle could continue and end before rates return to pre-pandemic levels. Fiscal policies will differ but play a significant role globally.
- Emerging Markets will prove resilient overall. Asia will remain a major driver of global growth through the dominance of its technology supply chain, supportive government policies, and increasing regional integration and resilience. India and Indonesia are standing out.
- US elections. The impact of Trump’s policies will depend on the scale and sequencing of their implementation, as well as on mitigation factors economies may put in place. In Asia, China has policy room to react; India and Indonesia are the most insulated. Europe may respond enacting trade re-routing, strengthen defence cooperation and accelerate structural
Seizing opportunities in risk assets, while balancing inflation risks will be key in 2025. Investors should broaden equity exposure beyond US mega-cap stocks, look for income across liquid and illiquid assets, and implement hedges in a more fragmented world.
In a world of anomalies, there are plenty of bright spots. Identifying the opportunities created by policy choices and geopolitical shifts will be as important as safeguarding against the risks they entail.
