2025 Outlook

2025 Outlook

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In our base case, we expect steady economic growth in the US, supported by strong

consumer spending, loose fiscal policy, and lower interest rates.

Tariff threats may pose challenges for Asia and Europe, but any imposed tariffs could

be partially offset by stimulus measures in China.

Growth in Europe is expected to improve slightly with falling interest rates.

In a positive scenario, lower taxes, deregulation, and trade deals could contribute to a

favorable market outlook based on strong growth and continued investment in

artificial intelligence.

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On the other hand, trade tariffs, large fiscal deficits, and geopolitical tensions could

lead to higher inflation, slower growth, and increased market volatility.

We believe artificial intelligence remains one of the most significant investment

opportunities of the decade. Investors should consider both large-cap public

companies and innovative private firms.

Rising electricity demand and efforts to meet decarbonization goals are also

expected to create long-term opportunities in energy and resource-related sectors.

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U.S. Markets

The US economy has exceeded expectations over the past two years, with higher

interest rates not causing the sharp slowdown many had predicted.

In 2024, nonfarm payroll growth averaged 170,000 per month, and GDP growth is

estimated at 2.7% for the year. For 2025, we expect economic growth to slow slightly

but remain close to 2%.

Inflation is likely to continue declining, although selective tariffs might cause

temporary price increases for some goods. Goods prices in the US have been

deflationary for three years, and high shelter prices are starting to ease.

We expect the Federal Reserve to reduce interest rates by another 100 (125) basis

points in 2025, bringing rates to around 3.25%-3.50% by year-end. Lower rates

should relieve pressure on households and businesses while improving conditions in

sectors sensitive to interest rates.

Tax cuts and deregulation could provide additional support to the economy.

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APAC Markets

Growth in Asia is expected to slow slightly in 2025, with variations across countries:

• China: Additional tariffs on US imports from China could raise the effective

rate to 30% by 2026. A potential 60% tariff could severely impact trade

between the two countries. However, China’s local government debt resolution

plan and possible stimulus measures should help mitigate risks. Growth is

forecasted to decline from 4.8% in 2024 to 4.0% in 2025.

• India and Indonesia: These economies are likely to see stronger growth due

to favorable demographics and lower tariff risks.

• Japan: Growth is expected to rise to 1.1% in 2025 from -0.2% in 2024,

supported by higher wages and consumption. A Bank of Japan rate hike is

likely by mid-2025.

• Australia: GDP is forecast to grow from 1.2% in 2024 to 2.0% in 2025, helped

by fiscal measures and higher demand for minerals used in renewable energy.

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European Markets

A global trade war could pose risks to Europe, particularly to “export-oriented”

economies.

Germany, France, and Italy are expected to grow modestly, at around 1%, due to

structural challenges, political instability and limited fiscal flexibility.

Spain, the UK, and Switzerland are likely to perform better, with growth rates of

approximately 2.3%, 1.5%, and 1.3%, respectively.

Despite tight fiscal budgets and weak manufacturing demand from China, higher

savings rates and rising real incomes should support consumer spending as inflation

falls. Additional interest rate cuts by the ECB, Bank of England, and Swiss National Bank are

expected to encourage corporate investment.

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Interest Rates

In 2025, major central banks are expected to adjust rates to neutral levels that neither

stimulate nor restrict growth.

We anticipate further cuts, including 100 to 125bps from the Fed, 50bps from the

Swiss National Bank, 125bps from the ECB, and 100bps from the Bank of England.

Falling rates will reduce cash returns, but investment-grade bonds are expected to

deliver attractive mid-single-digit returns.

Diversified fixed-income assets and equity income strategies may help maintain

portfolio income.

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Fixed Income

We are optimistic about high-grade and investment-grade bonds. Yields on quality

bonds are attractive, and corporate fundamentals remain solid.

We expect mid-single-digit returns for investment-grade bonds in USD, EUR, and

GBP.

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Equities

We expect equities to continue performing well, supported by lower interest rates,

stable economic growth, and advancements in technology.

The S&P 500 is projected to reach 6,600 by the end of 2025, reflecting a 10% price

increase.

Tariffs and geopolitical risks may cause volatility in Europe and China.

Europe, small- and mid-cap stocks, as well as Swiss dividend payers, are priced

attractively.

AI-related companies remain a key focus, spanning semiconductors, cloud services,

devices, and data centers.

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Gold

We expect gold to build on its gains in 2025.

Lower interest rates, persistent geopolitical risks, and strong dollar-diversification

trends are likely to continue driving both investor and central bank buying.

Traditional drivers of gold, such as lower real interest rates, fading dollar strength,

and heightened geopolitical uncertainties, are expected to remain significant in the

year ahead.

We anticipate gold prices could reach new highs in 2025, supported by higher inflows

into exchange-traded funds (ETFs). The third quarter of 2024 recorded the strongest

net inflows into gold ETFs since the first quarter of 2022.

In addition to gold, we see long-term opportunities in copper and other transition

metals as demand grows alongside increased investment in power generation,

storage, and electric transport.

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Oil

In the oil market, consensus suggests there could be an oversupply in 2025.

However, we believe current low prices may lead to reduced supply growth in the US.

Additionally, OPEC+ is likely to act cautiously when increasing supply, especially if the

market appears unable to absorb it. Renewed sanctions on Iran and Venezuela could

also impact supply. At the same time, solid global economic growth, interest rate

cuts, and fiscal stimulus measures should slightly increase oil demand.

With financial positioning in oil currently low, we expect moderately higher crude oil

prices in 2025. We favour strategies that generate yield while taking on the risk that

oil prices will not fall below a certain level.