Allianz Global Investors: US economy poised for soft landing, US stocks still attractive
1min read Allianz Global Investors published its 2025 market outlook report, which indicated that the prospects for risk assets appeared positive as the US election produced a decisive result, and the US and global economies were expected to achieve a soft landing, but there could be hidden volatility in the future. There was still a risk that the easing cycle could be disrupted by a resurgence in inflation, and the market was expected to be volatile. It was a good time to reconsider asset allocation, and investors could choose to increase risk exposure or to increase their holdings of illiquid assets such as private placement bonds and infrastructure.
Allianz Global Investors' base-case scenario for the US economy was a soft landing, with inflation slowing and avoiding a recession. This was good news for risk assets, especially US stocks, which were attractive despite their high valuations.
The global economy was divided -- the gap between US economic growth and that of Europe and Japan was likely to persist in the second Trump presidency, and investors would need to cope with a reshaped geopolitical environment due to tariffs and potential trade wars.
While a cut in interest rates was expected to benefit the bond market, there was a risk of a resurgence in inflation, which meant investors should prepare for the market misalignment that could occur if the easing cycle was delayed.
Investors could consider rebalancing risk assets by reallocating assets currently held in cash or low-risk money market funds to medium-risk opportunities in the fixed-income or private markets, thus balancing high-risk investments.
As European new rules increased the inflow of retail investors, private placement bonds and infrastructure were likely to grow faster, and illiquid assets could become increasingly important as a diversification tool.
