Investment outlook for 2025

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International equities

Consensus emerges in the reports that international equities could experience moderate to positive returns in 2025. While valuations have increased due to a strong rally in 2024, the economic environment — characterised by stable GDP growth and easing inflation, supports further earnings growth. Investment professionals mostly agree that a well-diversified portfolio would be prudent for 2025, with a shift away from mega-cap technology stocks to undervalued sectors such as infrastructure, industrials and value stocks. Additionally, innovations in artificial intelligence (AI) and clean energy are identified as transformative themes for global equity markets.

US equities outlook

US equities are consistently identified as offering better opportunities compared to other developed markets for 2025. Strong corporate earnings, supported by tax cuts, deregulation and ongoing fiscal stimulus, underpin this outlook. Most reports project that the S&P 500 could achieve double-digit growth this year, driven by an expansion of market leadership beyond a few tech giants. Robust consumer spending, fiscal initiatives like the CHIPS Act, and investments in AI are seen as key growth drivers. However, stretched valuations and heightened geopolitical risks are noted as potential headwinds.

Emerging markets outlook

Emerging markets (EMs) equities present significant opportunities, particularly in Asia. India and China are highlighted as standout performers. India is poised to maintain its status as the fastest-growing large economy, supported by demographic advantages and ongoing infrastructure investments. China, bolstered by fiscal and monetary support, shows good potential, although geopolitical tensions and policy uncertainty remain risks. Beyond Asia, Latin America’s resource-rich economies could benefit from rising commodity prices. Reports emphasise the need for selectivity in EMs due to risks such as a strong US dollar, interest rate volatility and local political uncertainties.

Interest rate outlook

There is strong consensus that global central banks are entering a monetary easing cycle, with further interest rate reductions expected in 2025. In the US, the Federal Reserve is anticipated to lower rates incrementally, targeting a neutral level of 3.75% to 4%. In Europe and other developed economies, the pace of rate cuts may be slower due to persistent inflationary pressures. Reports also suggest that long-term rates could rise moderately, reflecting economic growth and fiscal pressures.

Inflation outlook

Inflation is expected to stabilise in most regions, with the US leading the way toward stabilisation. Analysts forecast core inflation to remain within the 2% to 3% range for developed markets. Structural factors such as tight labor markets, energy prices and tariffs could introduce pockets of inflationary pressure. Emerging markets may experience more inflation variability due to currency fluctuations and commodity prices.

Commodities and gold outlook

The outlook for commodities is generally optimistic, driven by robust demand and constrained supply in key markets. Oil prices are expected to average $60 – $70 per barrel, supported by geopolitical factors and a recovery in global demand. Industrial metals could benefit from infrastructure investments and the energy transition. Gold is viewed as a hedge against geopolitical risks and inflation, with prices likely to remain high in 2025. Reports highlight the role of gold in diversified portfolios, especially as a defensive asset in uncertain economic conditions.

Risk areas

Several risk factors could disrupt the optimistic outlook for 2025. Geopolitical tensions, including US-China trade disputes and conflicts in Eastern Europe, pose significant risks. Potential new tariffs, stricter immigration policies and regulatory shifts under the new US administration could also impact market dynamics. Other risks include stretched equity valuations, potential fiscal imbalances and the possibility of global trade disruptions. In emerging markets, currency volatility and political instability are highlighted as key concerns.

In summary

The outlook, shared by prominent investment houses, for 2025 reflects cautious optimism for global markets. While US equities and emerging markets offer compelling opportunities, diversification and risk management are emphasised as critical strategies. Interest rate reductions, easing inflation and the ongoing transition to a sustainable economy provide a favourable backdrop for investments, but vigilance is essential to navigate potential geopolitical and macroeconomic shocks.