Global strategy 1Q 2025

Overall, the financial markets are entering the new year with confidence. The stock markets are at or near all-time highs and risk premiums on EUR corporate bonds are low. A solid economy in the USA and falling interest rates are decisive factors and we do not expect this to change for the time being. We therefore expect performance to remain positive. However, risks and the potential for volatility remain. A new administration under Donald Trump is taking office in the US, viable governments need to be formed in France and Germany and global trouble spots are still waiting to be resolved.

Economy: Key leading indicators in the eurozone weakened in the 4th quarter, so we expect growth momentum to slow. Despite the current poor sentiment, we are forecasting a slight increase in growth for 2025. This is partly because the real income situation of households should continue to improve thanks to falling inflation. Secondly, because the global interest rate reduction cycle should increase the propensity to invest. Starting from a solid level, we expect the US economy to cool down in 2025 as a whole, as we anticipate dampening effects from Trump's economic policy plans from 2Q25, above all the tariff regime. However, 1Q25 could still surprise on the upside due to front-loaded consumption and inventory build-up.

Bonds: For the eurozone, we expect a volatile sideways movement in the medium term with a tendency for yields to fall slightly, which should be supported by two ECB interest rate cuts of 0.25% each in 1Q25. Due to falling refinancing costs, we are sticking to our recommendation for BB-rated EUR corporate bonds with a focus on defensive sectors (such as telecoms, utilities). We see the best risk/return ratio there. In the context of a cooling economy in 2025, we expect the US Federal Reserve to cut key interest rates three times by 25 basis points each in 2025. This also suggests a slight decline in yields.

Currencies: The dollar could still gain somewhat in the first quarter. However, we expect a countermovement in the further course of the year. We think that the Swiss franc will strengthen somewhat in the coming months, but expect a volatile sideways market in the longer term. The ongoing geopolitical uncertainties and the Fed's interest rate cut cycle favor a rising gold price. We expect the gold price to rise to USD 2,780 in the first quarter.

Equities: Global earnings growth will be stronger in 2025 than in 2024. The consensus expectation is for earnings growth of +8.3% (y/y) and we consider this growth to be realistic based on the outlook for major global companies. We see further upside potential due to the reasonable valuation of global equities and the positive earnings outlook. We expect the global equity market index to rise in a range between 0% and +5% in 1Q25.

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