The transition to 2025 brings a complex mix of challenges and opportunities for the global economy. With a focus on the United States and the pivotal role of Donald Trump’s policies, the analysis by Pictet Asset Management’s Strategy Unit provides a detailed outlook on potential scenarios and risks for the year ahead.
Political and economic scenarios
Trump’s presidency continues to significantly influence global markets. The debate between a “good Trump,” implementing partial tax cuts and deregulation, and a “bad Trump,” enacting drastic protectionist measures such as a 60% tariff on Chinese imports, is central. According to Pictet, the likelihood of a recession caused by such policies is 15%, while there’s a 25% risk of an inflationary shock.
The most likely scenario is partial implementation of policies, allowing for stable global growth of 2.8% in 2025. This balance could be supported by central bank monetary easing, even though inflation is expected to remain below the 2% target.
Outlook for Europe and China
Despite current weaknesses, there are signs of stabilization in Europe and China. In Europe, Germany’s recession may open the door for stimulus measures by the European Central Bank. In China, fiscal and monetary support measures are expected to offset potential declines in international trade, mitigating the impact of US tariffs.
Equity markets and key sectors
Resilience will define global equity markets. In the US, corporate earnings growth is projected at around 7%, supported by tax cuts and technological innovation, particularly in the artificial intelligence ecosystem. However, the risks of stagflation stemming from trade tensions remain high. Sectors like banking, utilities, and communications show the greatest potential to navigate the global landscape.
Fixed income and currencies
US and UK bonds offer compelling opportunities for 2025, with positive real yields and a gradual reduction in interest rates. The US dollar is poised for a potential long-term decline, benefiting the Japanese yen, while gold remains a valuable hedge against geopolitical risks.
