Global Markets Analyst_ Markets Outlook 2025_ Trading Tails and Tailwinds

Industry/Company Involved * No specific industry or company is mentioned in the provided text. The discussion focuses on global market outlook and investment themes. Core Views and Arguments 1. Global Economic Outlook: * US Growth: The US is expected to outperform its developed market peers and consensus expectations, driven by strong growth and favorable policy conditions. * Global Growth: Non-US economies are expected to see stable growth, falling inflation, and monetary easing in the central scenario. * Inflation: Inflation is expected to decline, allowing central banks to focus more on growth risks and begin lowering policy rates. * Trade Policy: Tariffs and trade uncertainty pose risks to global growth and could lead to higher inflation and financial conditions tightening. 2. Investment Themes: * Equities: US equities are expected to outperform, but valuation challenges remain. Diversification and hedging strategies are recommended. * Bonds: US Treasuries and TIPS, as well as Bunds and Gilts, can play an important diversifying role in portfolios. * Commodities: Energy markets are expected to be range-bound, with upside risks from geopolitical events and downside risks from spare capacity and trade tensions. * Currencies: The US Dollar is expected to strengthen, driven by strong US growth and favorable policy conditions. However, risks remain, including broader trade wars and fiscal policy responses abroad. 3. Regional Outlook: * US: Strong growth and favorable policy conditions are expected to support the US economy and financial markets. * China: Challenges and prospects for China's macro and market picture are mainly domestic, with trade tensions and policy responses playing a role. * Europe: European growth and EM face headwinds from Trump's agenda, raising the bar for capital inflows. * Emerging Markets: EMs are vulnerable to global trade wars and could struggle to generate higher returns relative to US equities. Other Important Points * Fiscal Risks: Fiscal expansion in the US, Japan, UK, and some EMs raises risks of higher terminal rates and inflation. * Energy Markets: Oil prices are expected to be range-bound, with upside risks from geopolitical events and downside risks from spare capacity and trade tensions. * Inflation Risks: Inflation risks remain, particularly if trade tensions escalate or if there are unexpected geopolitical shocks. * Valuation Challenges: US equity valuations remain high, and valuation challenges could become more pronounced if growth risks rise or if the macro outlook deteriorates.