Société Générale Predicts Global Market Shift by 2025 with U.S. Equities and Gold Holding Strong

Analysts from Société Générale are forecasting a warmer climate for global equity risk appetite by 2025. Key driving forces include anticipated shifts in U.S. policy, the unwinding of yen carry trades, and the termination of Germany's constitutional "debt brake" rule. Such developments suggest a transition period that might reshape global financial landscapes.

The strategy team, under the leadership of Alain Bokobza, anticipates an escalation in the use of industrial policy, which remains a pivotal element in the ongoing global trade tensions. It is predicted that the United States will exert pressure on its allies to increase investment in domestic defense capabilities. In turn, emerging markets could be disproportionately affected by explicit repatriation strategies.

Despite the current high valuations and relatively low equity risk premiums, the analysts have decided to slightly increase the weight of U.S. equities to 30%. Overall equity exposure has been elevated by three percentage points to a total of 45%. There's a notable reallocation of European continental exposure towards the United Kingdom.

The analysts are bullish on U.S. and European bank stocks, while also favoring the S&P equal-weight index. They foresee a continued downward trend in oil prices, providing some relief from reflationary concerns and allowing central banks to maintain a moderately accommodative stance.

Given the intensifying geopolitical tensions worldwide, the team has decided to maintain a 7% allocation in gold holdings unchanged. However, they have refrained from extending exposure to other commodities, aligning their strategy to current global economic dynamics.