In the fourth issue of our quarterly publication PERSPECTIVES, we provide an update on our economic and asset class views for the remainder of 2024 and 2025.
Introduction
The global economy is growing at a pace of 3%. We expect this to continue in 2025 and 2026. However, importantly, we see different speeds and dynamics under the surface. U.S. exceptionalism might moderate somewhat, but may stage a comeback in 2026, European growth and the German economy in particular could be “less bad” while Asia remains the centre of growth. Inflation might be less a concern with current price dynamics, but we do think it would be wrong to underestimate the impact of fiscal spending. Against this backdrop inflation will be sticky over the next two years. We therefore expect a continuation of the current cutting cycle, but at the same time, central banks will remain vigilant. Overall, the macro backdrop is especially supportive for equities and corporate bonds as solid earnings growth leads to attractive fundamentals for both.
Rates and yields can be expected to remain relatively high for longer providing an appealing stream of income to investors. Of course there cannot be an outlook without risks: Politics will keep uncertainty high, monetary and fiscal policies will keep investors busy and geopolitics will continue to influence the investment environment. As always, astute portfolio construction, security selection and risk management remain key.
