The global economy is set to continue to deliver growth in the region of 2.5 – 3% over the next couple of years. While this is broadly in line with 2023 and 2024, the relative stability masks some major shifts at the country level. Stronger growth in the US is offset by weaker growth elsewhere.
Trump’s plan to cut taxes and regulation should boost US growth in 2025 and 2026. However, faster growth may add to the inflationary pressure from any potential tariffs and immigration restrictions, which could mean less scope for interest rate cuts.
Summary of our investment views
Economic fundamentals suggest that 2025 should be another positive year for equities and risk assets more broadly. The challenge is that downside risks are greater than before; the prospect of an all-out trade war looms large, the outlook for interest rates is uncertain and government debt continues to rise.
Diversification can help mitigate some of these risks. In multi-asset portfolios, bonds should provide some protection against risks to growth, while gold and other commodities help to manage the risk of inflation and elevated geopolitical tensions.
Within equities, the US mega-caps continue to deliver from an earnings perspective. Exposure to the UK, Japan and US small- and mid-caps should bring diversification and, to an extent, mitigate concentration risk.
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