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Investment Monthly

08 January 2025
Download the full reportPDF, 4.44MB

Key takeaways

  • Global conditions are supportive of further market gains in 2025, but rising policy uncertainty is likely to translate to a more volatile market environment
  • Converging global growth gives neglected parts of global stock markets outside the US an opportunity to catch up
  • Emerging and frontier markets trade at a valuation discount, and have the potential to deliver strong returns
  • Diversification into alternatives such as hedge funds, private credit, and defensive real assets can build portfolio resilience

Macro Outlook

  • A backdrop of active fiscal policy, trade uncertainty, and geopolitical tensions may cause volatility and could leave investors ‘spinning around’ in 2025
  • We expect disinflation, resilient growth, and robust corporate profits to progress, allowing the global rate cutting cycle to continue
  • Growth rates in advanced economies are expected to converge. US growth is cooling but we see little risk of a near-term downturn. The world’s premium economic growth rates will be in Asia and Frontier economies
  • For emerging markets, US dollar dynamics are key. It is hard to forecast a materially weaker dollar in 2025, but a stronger dollar isn’t guaranteed

Policy Outlook

  • The outlook for global trade policies is unclear, and US fiscal policy is set to remain loose. Concerns about inflation are likely to linger for a bit longer
  • Interest rate cutting cycles are likely to be shallow in 2025, with the Fed taking a more hawkish view on inflation and the timetable for further rate cuts
  • In the eurozone, headline inflation is close to its 2 per cent target and growth should move towards trend in 2025 – the ECB has more room for easing
  • Chinese policy support – including liquidity, fiscal/credit, structural measures – can boost the economy out of the deflation trap