Financial Capital

Uncertainty reigns but global GDP will most likely continue to grow at a decent clip in 2025, with the US outperforming other DMs thanks to tech innovation, resilient consumer spending, pro-cyclical fiscal policy, and a regulatory rollback under President Trump. His agenda, particularly on trade, brings risks to the US economy too of course. But Europe and China have more to fear given their weaker economic fundamentals, greater trade openness, and Trump’s stated foreign policy priorities in Europe and Asia. Europe seems particularly vulnerable as it faces political instability at home, rising indebtedness (without the dollar), and proximity to the war in Ukraine. Inflation stickiness looms large, and central banks have recently pushed back on dovish market expectations for 2025. Against this backdrop, stretched valuations in equities and tight credit spreads leave little room for error. Volatility seems inevitable.

This month we discuss the market reaction to Donald Trump’s emphatic victory, and Europe’s struggles amid political paralysis in Paris and Berlin.

This month, we discuss the return to Big Tech outperformance, the outlook for fixed income, and what a Trump victory might look like for investors.

Steady, if not speedy, disinflation has allowed monetary easing to begin in Europe, and, latterly, in the US, as well as in many large emerging markets. As a base case, we expect this process to continue. But upside surprises for inflation and rates are a distinct possibility. Wars in the Middle East and Ukraine perpetually threaten to disrupt energy and food supplies; China has opened the floodgates to more policy stimulus; and the US election may well carry Donald Trump back into office on the promise of more tax cuts and trade protectionism. Meanwhile, markets are pricing in a goldilocks ‘soft landing’ scenario for the global economy, reflected in razor-thin credit spreads and toppy equity multiples on cycle-high earnings. Downside risks for traditional asset prices are elevated, with gold and alternatives obvious redoubts for investors. But the rosy market consensus may yet prove right.

In this article, we explore the prevalent trends across private markets in 2024 and highlights future areas of growth and opportunity.

This month, we discuss the ramifications of the long-awaited first US interest rate cut, as well as stimulus in China.

This month, we discuss the global equity sell-off and the subsequent recovery, the unwinding of Yen carry trades, the outlook for US interest rates, and our duration posture.