Outlook 2025: Ralph Wessels (ABN AMRO)
This text was originally written in Dutch
By Ralph Wessels, Chief Investment Strategist, ABN AMRO
What is the economic outlook for 2025?
'We are cautiously optimistic for 2025, but will remain vigilant throughout the year. Our economists expect the start of 2025 to be good for the global economy, but that Trump's trade war will create headwinds during the year. Nevertheless, the US continues to lead the way. Europe and China appear to be leaving the trough behind, with the Chinese government set to continue stimulating sparsely. Most at risk is Europe, where growth momentum is waning. Our expectation is for central bank policy to diverge. The Fed needs to fight rising inflation and may be slower to cut its policy rate, while the ECB needs to support the economy with lower interest rates.
As a result, we remain slightly overweight both equities and bonds for now. Earnings growth expectations are reasonable, while margin improvement is still possible if Trump starts cutting taxes and provides fewer regulations. However, valuation is a concern. In terms of regions, we prefer the US, with a neutral view on emerging markets and an underweight on Europe. In bonds, our preference remains for quality over higher risk. High yield and EMD are also expensive.
Throughout the year, investors will have to remain alert because of the uncertainty about Trump's plans. We assume a gradual hike in rates from the second quarter. There are still opportunities here for Europe if it can negotiate an exemption position. Other risks are geopolitical tensions and rising inflation due to increased import tariffs.'
Off to a good start, but be alert.