KGI Securities Cuts 2025 U.S. Earnings Forecast to 9% Amid Economic Uncertainty

KGI Securities has released its market outlook for the second half of 2025, indicating that the probability of a bear market in the U.S. stock market this year is relatively low. However, the firm anticipates a potential decline in the third quarter, with the full-year earnings forecast being adjusted from 14.1% to less than 9%. This adjustment reflects the firm's cautious stance on the economic outlook and the potential impact of geopolitical uncertainties.

In response to these market conditions, KGI Securities recommends that investors focus on defensive and high-quality stocks. Defensive stocks, which are typically less sensitive to economic fluctuations, and high-quality stocks, which have strong fundamentals, are expected to perform better in the current market environment. This strategy aims to mitigate potential risks and provide investors with a balanced portfolio that can navigate through market challenges while maintaining growth potential.

KGI Securities' Chief Investment Officer, Liang Qitang, suggests that investors should consider the ACE strategy for asset allocation. This strategy involves diversifying investments across alternatives, credit selection, and elite stocks. The firm expects that the fiscal conditions of various governments, along with geopolitical uncertainties, will create favorable conditions for gold prices. Additionally, the firm recommends maintaining a focus on high-quality bonds, particularly those issued by leading enterprises, as they offer stable returns and are less susceptible to market volatility.

The firm's analysis indicates that the global economy is expected to slow down in the second half of 2025, with the most significant slowdown occurring in the U.S. The firm anticipates that the U.S. economy will grow at a rate of less than 1% in the second half of the year, with the full-year growth rate estimated at approximately 1.35%. This slowdown is attributed to the waning effects of trade wars and the uncertainty surrounding government policies, which have impacted consumer confidence and business orders. The firm also notes that the labor market data is showing signs of weakness, which could further affect wages and consumption.

KGI Securities' Investment Advisory Board Chairman, Zhu Yanmin, highlights that while the easing of trade tensions has reduced the risk of an economic recession in the U.S., the uncertainty surrounding these tensions has already impacted economic confidence. The firm advises investors to be cautious of potential market volatility, particularly as the temporary relief from tariffs expires and economic data continues to be influenced by these uncertainties. The firm recommends a balanced approach to investing, focusing on sectors that are less affected by trade tensions and have strong fundamentals.