The Pinnacle: December 2024

Written By TallRock Capital

December 2 0 2 5 • I S S U E 48

The Year Ahead: 2025 Investment Outlook

As 2025 begins, leading investment firms are rolling out their annual outlooks, offering insights into global economic trends, potential opportunities, and looming risks. This year’s narratives are shaped by stabilising inflation, cautious optimism about growth, and divergent central bank policies across major economies. Here's what large investment companies foresee for the global economy in the year ahead.

United States

Many investment houses, including JP Morgan, highlight the U.S. economy's resilience amid a challenging 2024 globally. GDP growth of approximately 2% is predicted for 2025, underpinned by strong consumer spending and robust labour markets. However, the Federal Reserve (Fed) is expected to maintain higher interest rates for most of the year, prioritising inflation control over immediate rate cuts. Goldman Sachs adds that sectors like technology and healthcare may continue to lead U.S. equities, supported by steady earnings growth and technological innovation.

Eurozone

In the Eurozone, investment giants like BlackRock emphasise the region’s gradual recovery from energy shocks and inflationary pressures. European Central Bank (ECB) President Christine Lagarde has signalled a measured approach to monetary policy, with expectations of modest interest rate cuts by mid-2025. Some analysts anticipate GDP growth of around 1%, driven by improving trade balances and more resilient consumer spending. The industrial and green energy sectors are identified as key areas of growth, bolstered by EU policy support and increased investment in renewable energy. Nonetheless, risks such as geopolitical tensions and uneven growth among member states could temper optimism.

United Kingdom

For the UK, 2025 begins with a cautiously optimistic tone. Inflation has shown consistent decline, allowing the Bank of England to commence rate cuts. UK GDP growth is projected at 0.9% for 2025, reflecting subdued business investment and tepid export performance post-Brexit. On a positive note, sectors such as financial services and clean technology remain strong contributors to economic resilience. Analysts at Vanguard suggest that pound sterling could strengthen modestly against major currencies, supported by stabilising monetary policy and improved investor sentiment.

China

China’s post-COVID recovery has been slower than anticipated, but major investment firms see signs of stabilisation in 2025. Morgan Stanley predicts GDP growth of 4.5%, driven by government stimulus measures and improving domestic demand. Efforts to pivot the economy toward consumption-led growth are expected to gain traction, reducing reliance on exports and heavy industry. Sectors such as electric vehicles, semiconductors, and renewable energy remain focal points for global investors. However, regulatory risks and geopolitical tensions with the US and its allies could weigh on market sentiment.

Emerging Markets

Emerging markets are expected to have a mixed but generally positive year. JP Morgan Asset Management highlights that regions like Southeast Asia and Latin America could benefit from favourable demographic trends and capital inflows. Countries such as India and Indonesia are expected to outpace global growth averages.

Global Trends: Key Themes for 2025

  1. Energy Transition: Renewables and clean technology are expected to continue to attract significant capital, driven by policy incentives and corporate sustainability goals. This theme is particularly relevant in the Eurozone and emerging markets.

  2. Resilient Consumer Spending: Despite headwinds, consumer spending remains a pillar of growth in the US, supported by a resilient labour market and government stimulus measures.

  3. Divergent Monetary Policies: While the U.S. Federal Reserve and ECB are expected to tread cautiously on rate cuts, central banks in emerging markets may adopt more accommodative policies to stimulate growth.

  4. Technology and Innovation: Advancements in AI, green energy, and semiconductors are likely to dominate investment narratives, likely offering long-term growth opportunities.

Conclusion: Preparing for 2025

As 2025 unfolds, the global economic landscape presents a blend of opportunities and challenges. While inflationary pressures have eased, the path to sustainable growth remains uneven across key regions. Investors are encouraged to adopt a balanced approach, focusing on diversification and aligning portfolios with long-term growth themes. With cautious optimism, 2025 is expected be a year of adaptation and resilience in global markets.

Incoming Trump Presidency: Economic Outlook

Donald Trump's re-election as the 47th President of the United States in November was one of the main economic stories of 2024 and has generated significant discussion regarding the potential economic trajectory under his renewed leadership. As Trump prepares to take office, his policy outlook is certainly worth a further look, as the US economy currently exhibits notable strength. December’s labour market data revealed a ten-basis point reduction in the Unemployment Rate to 4.1%, accompanied by a 3.9% increase in wages over the year.

Proposed Economic Policies

Trump's economic agenda includes several key initiatives:

  • Tariffs and Trade: Plans to implement a universal baseline tariff of 10% to 20% on all imports, with higher rates for countries engaging in unfair trade practices, aim to bolster domestic manufacturing and reduce trade deficits. However, such measures may lead to increased consumer prices and potential trade conflicts.

  • Tax Reforms: Proposals to extend and expand tax cuts from his 2017 overhaul, including lowering the corporate tax rate to 15%, are intended to stimulate business investment and economic growth. Critics caution that these cuts could exacerbate the federal deficit.

  • Regulatory Changes: A commitment to deregulation, particularly in the energy sector, seeks to enhance production and economic activity. This approach may raise environmental concerns and face legal challenges.

The anticipated policies could yield several outcomes:

  • Market Growth Opportunities: Investors are optimistic about the potential for growth in key sectors, especially manufacturing and technology, as policy shifts aim to boost domestic production and innovation. The focus on reducing trade imbalances and supporting American industries is expected to create opportunities for long-term stability in the stock market and broader economy.

  • Controlled Inflation and Economic Expansion: While the combination of tax cuts and tariffs may lead to moderate inflation, it also signals robust economic activity. The Federal Reserve's response, if necessary, would aim to balance growth with stable prices, maintaining confidence in the financial system. Lower taxes and increased spending power for businesses and individuals could further drive economic expansion.

  • Strengthened Global Trade Dynamics: The administration's focus on recalibrating trade agreements is anticipated to foster fairer and more reciprocal partnerships. Negotiations aimed at reducing trade deficits and promoting US exports could strengthen global economic ties in the long run, benefiting both domestic and international markets. Strategic alliances and new trade frameworks may provide a more sustainable and balanced global trade environment.

This forward-looking approach underscores the potential for President Trump’s economic policies to catalyse growth, enhance market confidence, and ensure the US strength remains on the global stage

President Trump's return introduces a blend of policies aimed at stimulating economic growth through tax reductions and deregulation, alongside protective trade measures designed to prioritise domestic industries. While these strategies have the potential to sustain economic expansion, they also carry risks such as increased international trade tensions. The administration's challenge will be to balance these factors to maintain economic stability and growth.

TallRock Capital https://www.tallrockcapital.com
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The Pinnacle: November 2024