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Investment Monthly

Uncertainties and opportunities
02 December 2024
    Articles
    Download the full reportPDF, 4.47MB

    Key takeaways

    • Global conditions are supportive of further market gains in 2025, but rising policy uncertainty is likely to translate to a more volatile market environment
    • Converging global growth gives neglected parts of global stock markets outside the US an opportunity to catch up
    • The fundamental case for EM remains underpinned by undemanding valuations. Better-than-expected news could be doubly good for performance. We prefer Asia stocks and credits, and local-currency EM debt
    • Diversification into alternatives such as hedge funds, private credit, and defensive real assets can build portfolio resilience

    Macro Outlook

    • We expect disinflation, resilient growth, and robust corporate profits to persist in 2025, allowing the global rate cutting cycle to continue
    • Growth rates in advanced economies are expected to converge. US growth is cooling but we see little risk of a near-term economic downturn
    • The world’s premium economic growth rates will be in Asia and Frontier economies. But The “multi-polar” world brings with it geopolitical tensions creating volatility in commodity prices
    • For emerging markets, the US dollar outlook is key. It is hard to forecast a materially weaker dollar in 2025, but a stronger dollar isn’t guaranteed

    Policy Outlook

    • The outlook for global trade policies is unclear, and US fiscal policy is set to become looser. Concerns about inflation are likely to linger for a bit longer
    • Interest rate cutting cycles are likely to be shallow in 2025, with the Fed expected to cut the funds rate to a more neutral level of ~3.50% by end-2025
    • Chinese policy support – including liquidity, fiscal/credit, structural measures – can boost the economy out of the deflation trap
    • The UK Budget highlighted how countries with high debt and wide deficits are facing market pressures to avoid fiscal largesse

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