Many of the world’s central banks, having largely succeeded in curbing inflation, are now easing monetary policies with the aim of stimulating growth. In 2025, we anticipate signs of economic deceleration to be counteracted by the supportive impact of the global rate-cutting cycle — in other words, we think we are seeing a soft landing. We expect growth to continue to slow in the near term, followed by a reacceleration through 2025, which should foster a favorable environment for risk assets globally.
In the US, we see the economy decelerating towards potential growth rates before reaccelerating later in the year, supported by a resilient labor market and easing financial conditions. The eurozone and the UK experienced very slow growth or recession in the last year, but we expect growth there to gradually pick up momentum through 2025, aided by central bank rate cuts and moderate real wage growth. Meanwhile, Japan's recent wage growth and policy adjustments position it as a potential bright spot, though the yen is likely to strengthen and impact Japan’s export-heavy market. In China, we expect the recent policy pivot to support domestic growth and provide a floor to market sentiment. However, we think the reflationary impact on the rest of the region could be limited.
Emerging markets (EM) should benefit from the rate-cutting cycle in developed markets (DM), a somewhat softer US dollar, and a global growth uptick. Specific stories, such as India's growth boom, suggest areas of outperformance, while China's policy stimulus could enhance growth prospects.
Overall, we expect a conducive environment for risk assets, particularly in non-US developed markets, small capitalization stocks, and value sectors in the US, with European assets likely to outperform the US due to favorable valuations and cyclical sector weightings.
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The opinions referenced above are those of the author as of Oct. 31, 2024. These comments should not be construed as recommendations, but as an illustration of broader themes. Forward-looking statements are not guarantees of future results. They involve risks, uncertainties and assumptions; there can be no assurance that actual results will not differ materially from expectations
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