Executive summary

The new US administration will be more inward-looking, with an overall pro-growth agenda that includes tax cuts and deregulation. It has also significantly reduced fears of an imminent recession. However, these measures, combined with higher tariffs and more restrictive immigration policies, will add to inflationary pressures, and could force the Fed to slow or even question its rate-cutting cycle.

The combination of robust growth, loose financial conditions and healthy corporate balance sheets means that we remain optimistic about the credit segment. We favour high yield (HY) across all regions due to the attractiveness of the all-in yield. We are more cautious on investment grade (IG), not only because of extremely tight spreads, but also because of greater interest rate sensitivity.

Despite rising policy risks, the overall environment remains supportive for equities.  With earnings growth expected to reach 15% in 2025, the US market should retain its structural advantage over other developed markets, but these ambitious estimates will be difficult to achieve and could lead to negative surprises, particularly for technology mega-caps.

 

 

Economic Outlook

US election resolution brings clarity to markets

Global growth remains resilient in 2025, in line with 2024 estimates

Growth divergence among developed economies widens

Global developed market policy rates normalizing

Fed rate cuts to be more measured

Inflation tilted to the upside, especially in the US under Trump 2.0

 

Key Risks

Fed forced to raise rates by one-off and persistent inflation shocks

Economic slowdown without fall in inflation leads to rise in term premiums

Ineffective policies lead to Japanification of Chinese economy

Japanese real interest rates on the rise

 

Investment Convictions

Eurozone growth headwinds give European Central Bank (ECB) room to cut rates

US yield curves could rise in 2025, adding duration if 10Y yield rises to around 5.0%

EM corporate spreads attractive, but volatility expected as trade tariffs unfold

Supportive policy should continue to underpin US Small and Mid-Caps

Interest-rate differentials remain as catalyst for flows into dollar-denominated assets

 

Table of contents

• OUTLOOK H1 2025 : EXECUTIVE SUMMARY
• 2024 REVIEW : KEY HIGHLIGHTS
• OUTLOOK 2025
• INVESTMENT CONVICTIONS
• ASSET CLASS VIEWS

Download the Outlook 2025