
Global economic outlook: a comparison of the US, Europe, and China
In 2024, the US economy displayed remarkable resilience. Despite a slowdown in midyear, recovery accelerated after Donald Trump’s election. The US labor market remains strong, with consumer sentiment remaining positive, bolstered by fiscal policies and deregulation efforts. However, risks tied to tariffs and stricter immigration policies loom large.
Conversely, the Eurozone’s economic performance has been disappointing. Manufacturing weakness persists, with unemployment likely to rise in 2025. Political tensions in France and Germany further weigh on the euro, limiting growth prospects.
On a brighter note, inflation in the Eurozone has edged closer to the ECB’s 2% target, potentially allowing for further interest rate cuts. Similarly, in the UK, easing monetary policy could spur growth, though inflation may remain above the Bank of England’s target.
China shows signs of stabilization, driven by strong demand from other emerging markets and government subsidies for electric vehicles and appliances. However, the US tariffs remain a significant uncertainty for the Chinese economy in 2025.
Bonds: a stable year ahead?
After years of volatility, 2025 is shaping up to be a stable year for bonds. Long-term yields seem fairly priced, with minimal expected movement, except for a potential decline in UK yields.
In Switzerland, the National Bank’s anticipated zero-interest rate policy limits the potential for local bonds. Corporate bonds, while expensive, remain attractive due to the lack of a significant recession. High-yield bonds are preferred over emerging market debt given geopolitical risks.
Equities: earnings growth is key
2024 was an exceptional year for equities, but 2025 hinges on corporate earnings growth. With US valuations already high, further multiple expansions are unlikely without a drop in interest rates. An earnings growth of 5-10% appears reasonable in a stable economic environment.
In Europe, declining interest rates could boost valuations, leading to potential upside surprises. However, emerging markets remain under pressure, largely dependent on further Chinese stimulus measures.
Asset allocation: risk assets in focus
The 2025 outlook favors a slight overweight in risk assets. Equities present more opportunities compared to bonds, particularly in developed markets. Diversifying into alternative investments, such as catastrophe bonds or commodities, is also advisable.
While risks like a US growth slowdown or heightened trade tensions persist, J. Safra Sarasin views 2025 as likely to be a normal year for financial markets.
A balanced year ahead? Share your thoughts
What are your views on the 2025 outlook presented by Philipp E. Bärtschi and J. Safra Sarasin? Do you think it will truly be a stable year, or are surprises in store? Share your thoughts in the comment form below!