Schroders' Top 10 Investment Outlooks for 2025 Sees Dollar and US Stocks
1min read Schroders recently published its top 10 investment outlooks for 2025, which include: stocks, Schroders is bullish on the overall US market (S&P 500 equal-weight index), emerging market/Asian stocks; bonds, Schroders is bullish on European government bonds, emerging market local currency bonds, 2-year and 10-year US Treasury bonds; and also bullish on gold, the US dollar, Asian credit and private market assets, but Schroders is bearish on oil.
Shiro Sasaki, Schroders, said the US economic growth outlook looks positive as the strong performance in the second half of 2024 is expected to continue, especially in consumption and the labour market. Although concerns about US consumer confidence had raised doubts about the local economy, recent data have eased those concerns. The total US consumer savings still remain high at nearly $2tn, and strong job data are expected to continue to support consumption spending. Even though inflation remains under control and the market has already digested a more aggressive monetary policy stance, the timing and extent of the Fed's rate cut remain uncertain. Despite this, the global stock market outlook looks positive as the US yield curve normalises and enters a policy easing cycle.
She said the US inflation rate has fallen below 3% overall and is considered to be experiencing an "economic soft landing", thus preferring the overall US stock market. Although economic and earnings growth has slowed in Europe, the opposite has happened in emerging markets and Asia, providing attractive entry points for these two regions.
Regarding Europe, Sasaki believes the European Central Bank has become "data dependent" after three rate cuts this year. As 2025 arrives, the eurozone is expected to continue to lower interest rates in the expectation of keeping inflation under control amid weak economic growth.
She also prefers European government bonds, Asian credit and emerging market local currency bonds. European government bonds are expected to benefit from the easing cycle, and the diversification effect of this asset class makes it attractive.
In Asia, strong economic growth, especially in China, India and Indonesia, could drive Asian credit performance, which is expected to offer more attractive credit spreads than US and European bonds. In addition, the yields of many emerging market local currency bonds are highly attractive, which is expected to bring significant returns in 2025.
Private market assets have increasingly gained attention from global and Asian investors in recent years, and Sasaki supports this trend. She noted the benefits of including such assets in a diversified portfolio, one of which is the low correlation with other asset classes. In addition, the credit spreads of private equity (PE) are higher than non-investment-grade bonds.