2025 Outlook: Five potential surprises for the economy and markets

Dirk Hofschire, CFA, Director of Asset Allocation Research 
Jacob Weinstein, CFA, SVP Asset Allocation Research   
Collin Crownover, PhD, Research Analyst, Asset Allocation Research 

• The two-year drop in U.S. inflation rates might not continue in 2025 due to persistent inflation pressures and the potential for new ones.
• The fiscal debate in Washington might create volatility in bond and asset markets, as legislative proposals create anxiety about exacerbating an already challenging debt outlook.
• Despite a Fed easing cycle, longer-term market interest rates may not fall as expected.
• Emerging-market equities might give U.S. stocks a run for their money, as discounted relative valuations make the positive surprise hurdle easier to clear.
• Investors might face below-average asset returns, as so much good news is already baked into consensus expectations.

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