Navigating 2025: Opportunities in a Shifting Market Landscape

As we step into 2025, the global economy finds itself at a crossroads, with a mix of opportunities and challenges presenting themselves to investors. The global economy is expected to experience robust growth, with the exception of a sharp slowdown in China. Global equity markets are likely to see a dispersion across stocks, styles, sectors, countries, and themes, with J.P. Morgan Research estimating a price target of 6,500 for the S&P 500 and earnings per share (EPS) of $270.

Policy rates in developed markets (DM) are expected to remain higher for longer, albeit with continued divergence between U.S. and euro area rates. Inflation in emerging markets (EM) is expected to slow as services inflation moderates, but core goods prices could see a temporary boost from tariffs and FX depreciation.

In this dynamic market landscape, investors should consider stocks and spread products in fixed income in 2025, with U.S. and Japan equities likely to be the most attractive. Heading into 2025, the global economy appears to have reached a balance: Moderate growth, disinflation, and continued monetary easing could all bode well for markets, complemented by the potential for greater deregulation. However, with looming uncertainty in the U.S. around the policies of an incoming Trump administration, as well as their potential impact, investors should be prepared to navigate a shifting market landscape.

Policy uncertainty in the U.S. will remain a factor worldwide, with potential deregulation as a positive, while tariffs and restrictions on immigration might disturb markets later in 2025. Equity valuations are more stretched than they were six months ago, but this is justified by company fundamentals and growing certainty about the economy. Investors should consider overweighting equities in their portfolios in 2025, with U.S. and Japanese stocks likely to be the most attractive, along with spread products within fixed income.

As we look ahead to 2025, investors should remain vigilant and adaptable, ready to capitalize on opportunities as they arise. By staying informed and maintaining a balanced portfolio, investors can navigate the shifting market landscape and position themselves for success in the years to come.