EFG today presented its outlook for 2025 with its top-ten convictions for the coming year.
Following the soft landing in 2024, it expects economic growth to remain resilient in 2025. EFG nevertheless anticipates that a number of headwinds could persist in the first half of the year, creating some uncertainty and potentially weighing on growth. It expects the situation to improve in the second half of 2025 and foresees further improvement into 2026.
EFG take the view that the global economy will show continued resilience in 2025 with GDP growth likely to reach around 3.2%. However, they have identified three main headwinds that could cause uncertainty and challenge economic growth in the first half of the year in particular:
First, EFG believes international trade could be disrupted if the Trump Administration introduces new tariffs on US imports, which could be as high as 60% for goods from China and 10%-20% for imports from the rest of the world. These steps and the retaliatory measures that they will likely trigger could threaten global growth and increase uncertainty about future trade relationships.
The second headwind relates to the Chinese economy, which is suffering from structural weaknesses in the property market, high local government debt and poor consumer confidence – all challenges that cannot easily be resolved and will weigh on the global economy, unless significant stimulus is forthcoming. Third, as Western Government’s around the world start to tackle their excessive deficits, this could act as a break to growth. This will though be differentiated based on the growth and productivity focus for each country. As a result, “bond vigilantes” will have a significant influence in 2025.
The outlook for the global economy is expected to improve in the second half of the year, however, EFG believes that the BRICS group could emerge as a key driver of global growth as they continue to increase in size and importance. BRICS nations are now home to around 45% of the world’s population and generate 37% of global GDP. Looking ahead to 2025, they are expected to account for half of the increase in global GDP according to the IMF with G7 major advanced economies contributing just 15%.
Another important theme in 2025 will be a shift in policy focus from inflation to employment. EFG takes the view that with inflation now close to pre-pandemic levels and back within central bank target ranges, the focus will shift to the labour market and onto job creation to drive growth. This shift will bear fruit in H2 2025 and into 2026.
AI goes mainstream
Alongside these macro themes, EFG anticipates that the importance of generative AI as a driver of growth will become increasingly visible in 2025. Following the rapid adoption of this technology in
2024, EFG anticipates that 2025 will be a year in which generative AI goes mainstream. With the US leading the way in AI investing, and with China and Europe lagging behind, AI is an important source of strength for the US economy, especially if it feeds through to higher productivity. EFG points out, however, that the increased usage of AI will push up electricity demand, with consumption by data centres, AI and the cryptocurrency sector set to double between 2023 and 2026 – paving the way for a comeback for nuclear energy to meet this soaring demand.
Corporate earnings expected to exceed long-term trend growth
2025 is also expected to bring corporate earnings growth of above 10%, supported by the resilience of the global economy. This would exceed the average annual growth in earnings of 6% seen over the last ten years. EFG believes that some sectors will fare better than others, with those that struggled in 2024 likely to rebound in 2025. Looking at the US, there is some concern about whether this level of earnings growth can be achieved, given the degree of concentration in the US stock market, with the top-ten companies in the S&P 500 index currently accounting for 35% of market capitalisation. Meanwhile, the outlook for small and mid-sized companies in growth sectors such as technology looks more positive.
Turning to the US and global equity markets in 2025, EFG believes the outlook is most promising for the consumer discretionary sector, given the broadly supportive economic fundamentals for this industry. In particular, wage growth, employment trends, accumulated savings, wealth effects and falling interest rates will buoy consumer spending in 2025, albeit to varying degrees. Further, EFG believes that in the consumer discretionary sector, valuations on the basis of its proprietary model are cheap relative to other cyclical sectors.
Opportunities in 10-year yields and high yield markets
In terms of opportunities in the fixed income markets in 2025, two trends are emerging. First, EFG believes there will be a general tendency for yield curves to steepen, particularly in the US. The conventional explanation is that this would be driven by more short-term interest rate cuts by policy makers as inflation recedes further. There will also be upward pressure on long-term bond yields as a result of higher government deficits. The second area of opportunity is in government bond yield spreads as well as opportunities in corporate and high yield markets. Sector and company selection will be more important than ever in an environment characterised by political and competitive change. EFG also continues to see opportunities in emerging market hard and local currency debt, given the stronger environment for BRICS.
Moz Afzal, Global Chief Investment Officer at EFG:
“For 2025, we expect economic growth to remain resilient. There may still be a number of headwinds that could challenge growth in the first six months of the year but they should ease in the second half. It is set to be an interesting year, with many different trends emerging, such as shifts in policy focus from inflation to employment, vulnerable government deficits, BRICS growing in importance. From a thematic perspective, we like trends such as AI going mainstream, the nuclear power renaissance, and a consumer discretionary revival. This all – means that 2025 will no doubt be a year of both opportunities and challenges.”
Overview of EFG’s top-ten convictions for 2025:
- The global economy remains resilient despite headwinds: Three headwinds are expected to
influence the global economy in 2025: Trade disruption, continued problems in China’s economy
and high government debt and deficits. Measures might be introduced to improve government
efficiency in the US and loosen restrictive fiscal policies in Germany. Uncertainty will be most
pronounced in the first part of the year but should ease in the second half of 2025 and into 2026. - BRICS grow in importance: The BRICS group is growing and now includes nine economies,
accounting for 45% of the world population and 37% of global GDP. Half of global growth in 2025
will be generated by BRICS nations. There may be greater cooperation within the group on trade
and finance as they become less dependent on western economies. - Focus of policy shifts from inflation to employment: With the battle against inflation largely won,
the focus will move to job creation. This shift will be easiest in the US where the Fed has a dual
mandate – low inflation and maximum employment. Job creation is also a high priority for many
other countries. - Government deficits remain a problem: Global government debt has reached USD 100 trillion and
high deficits mean debt levels are set to rise even further. High debt levels will not, however, lead
to austerity policies. Indeed, some countries may move in the opposite direction. - AI goes mainstream: The uptake of generative AI has been faster than that of the Internet. The US
leads China and Europe in AI investment, placing the US economy at a clear competitive
advantage. Cloud-based infrastructure needs to grow and adapt to accommodate these changes. - Nuclear power renaissance: Global electricity demand will soar due to the electrification of
housing, transport and industry, data centres and cryptocurrencies. Nuclear power is likely to
make a comeback as governments seek to meet the sharp rise in demand for electricity. - Corporate earnings still supported: Corporate earnings generally grow over the long term but in
the short term, the extent to which they can surprise on the upside is important for the equity
market. In the last two years, earnings were broadly in line with expectations and the S&P 500 has
produced gains of over 20% each year. Current expectations are for 10% earnings growth in 2025. - Market concentration – a relative danger: The top-10 companies in the S&P 500 index currently
account for 35% of its market capitalisation. This level of concentration has not been seen since
the 1960’s. However, three factors suggest this is not a problem: Historic parallels, the selection of
appropriate valuation measures and the risk of not owning the largest stocks. - Consumer discretionary is our favoured sector: The consumer discretionary sector is EFG’s
favoured area of the US and global equity market for 2025. Wage growth, employment trends,
accumulated savings, wealth effects and falling interest rates are expected to be supportive of
consumer spending in 2025. - Yield curve steepening: The fixed income market offers a range of opportunities. In 2025, two
areas appear to be particularly interesting. First, there will be a general tendency for yields curves
to steepen, particularly in the US. Opportunities related to the yield spread are also likely to be
found in the eurozone, as well as corporate and high yield markets and the BRICS
>> EFG’s Outlook 2025 publication (PDF)
Important Disclaimer
This document has been produced by EFG Asset Management (UK) Limited for use by the EFG International („EFG Group“ or „EFG“) worldwide subsidiaries and affiliates within the EFG Group. EFG Asset Management (UK) Limited is authorised and regulated by the UK Financial Conduct Authority, registered no. 07389736. Registered address: EFG Asset Management (UK) Limited, Park House, 116 Park Street, London W1K 6AP, United Kingdom, telephone +44 (0)20 7491 9111.
This document has been prepared solely for information purposes. The information contained herein constitutes a marketing communication and should not be construed as financial research or analysis, an offer, a public offer, an investment advice, a recommendation or solicitation to buy, sell or subscribe to financial instruments and/or to the provision of a financial service. It is not intended to be a final representation of the terms and conditions of any investment, security, other financial instrument or other product or service. The content of this document is intended only for persons who understand and are capable of assuming all risks involved. Further, this document is not intended to provide any financial, legal, accounting or tax advice and should not be relied upon in this regard. The information in this document does not take into account the specific investment objectives, financial situation or particular needs of the recipient. You should seek your own professional advice (including tax advice) suitable to your particular circumstances prior to making any investment or if you are in doubt as to the information in this document.
The information provided in this document is not the result of financial research conducted by EFGAM’s research department. Therefore, it does not constitute investment or independent research as defined in EU regulation (such as “MIFID II” or “MIFIR”) nor under the Swiss “Directive on the Independence of Financial Research” issued by the Swiss Banking Association or any other equivalent local rules.
The value of investments and the income derived from them can fall as well as rise, and you may not get back the amount originally invested. Past performance is no indicator of future performance. Investment products may be subject to investment risks, involving but not limited to, currency exchange and market risks, fluctuations in value, liquidity risk and, where applicable, possible loss of principal invested.
Although information in this document has been obtained from sources believed to be reliable, no member of the EFG group represents or warrants its accuracy, and such information may be incomplete or condensed. Any opinions in this document are subject to change without notice. This document may contain personal opinions which do not necessarily reflect the position of any member of the EFG group. To the fullest extent permissible by law, no member of the EFG group shall be responsible for the consequences of any errors or omissions herein, or reliance upon any opinion or statement contained herein, and each member of the EFG group expressly disclaims any liability, including (without limitation) liability for incidental or consequential damages, arising from the same or resulting from any action or inaction on the part of the recipient in reliance on this document. EFG and its employees may engage in securities transactions, on a proprietary basis or otherwise and hold long or short positions with regard to the instruments identified herein; such transactions or positions may be inconsistent with the views expressed in this document.
The availability of this document in any jurisdiction or country may be contrary to local law or regulation and persons who come into possession of this document should inform themselves of and observe any restrictions.
Financial intermediaries/independent asset managers who may be receiving this document confirm that they will need to make their own independent decisions and in addition shall ensure that, where provided to end clients/investors with the permission from the EFG Group, the content is in line with their own clients’ circumstances with regard to any investment, legal, regulatory, tax or other considerations. No liability is accepted by the EFG Group for any damages, losses or costs (whether direct, indirect or consequential) that may arise from any use of this document by the financial intermediaries/independent asset managers, their clients or any third parties.
Comparisons to indexes or benchmarks in this material are being provided for illustrative purposes only and have limitations because indexes and benchmarks have material characteristics that may differ from the particular investment strategies that are being pursued by EFG and securities in which it invests.
The information and views expressed herein at the time of writing are subject to change at any time without notice and there is no obligation to update or remove outdated information.
USA:
EFG Asset Management (North America) Corp. („EFGAM NA“) is a US Securities and Exchange Commission (SEC) Registered Investment Adviser For more information on EFGAM NA Corp, its business, affiliations, fees, disciplinary events, and possible conflicts of interests please visit the SEC Investment Advisor Public Disclosure website (https://adviserinfo.sec.gov/) and review its Form ADV.
EFG Asset Management (Americas) Corp. (“EFGAM Americas”) is a registered SEC investment adviser providing investment advisory services. Please refer to EFGAM Americas’ ADV Part 2 and/or Form CRS for additional information and risks. EFGAM Americas Registered address: 701 Brickell Avenue, Suite 1350 – Miami, FL 33131.
Switzerland: EFG Asset Management (Switzerland) SA is authorised and regulated by the Swiss Financial Market Authority. Registered address: EFG Asset Management (Switzerland) SA , Quai du Seujet 24, 1201 Geneva, Switzerland. Telephone +41 22 918 71 71.
Hong Kong: EFG Asset Management (Hong Kong) Limited is regulated by The Securities & Futures Commission (CE number AQU400). Registered address: EFG Asset Management (Hong Kong) Limited, 18th Floor, International Commerce Centre, 1 Austin Road West, Kowloon, Hong Kong.
Singapore: EFG Asset Management (Singapore) Pte Ltd is a capital markets services license holder regulated by the Monetary Authority of Singapore (License number CMS 100196-2). Registered address: EFG Asset Management (Singapore) Pte Ltd, 79 Robinson Road, #18-04, Singapore 068897.
United Kingdom: EFG Asset Management (UK) Limited is authorised and regulated by the UK Financial Conduct Authority, registered no. 07389736. Registered address: EFG Asset Management (UK) Limited, Park House, 116 Park Street, London W1K 6AP, United Kingdom, telephone +44 (0)20 7491 9111
Information for investors in Australia:
For Professional, Institutional and Wholesale Investors Only.
This document has been prepared and issued by EFG Asset Management (UK) Limited, a private limited company with registered number 07389736 and with its registered office address at Park House, Park Street, London W1K 6AP (telephone number +44 (0)20 7491 9111). EFG Asset Management (UK) Limited is regulated and authorized by the Financial Conduct Authority No. 536771.
EFG Asset Management (UK) Limited is exempt from the requirement to hold an Australian financial services licence in respect of the financial services it provides to wholesale clients in Australia and is authorised and regulated by the Financial Conduct Authority of the United Kingdom (FCA Registration No. 536771) under the laws of the United Kingdom which differ from Australian laws.
ASIC Class Order CO 03/1099 EFG Asset Management (UK) Limited notifies you that it is relying on the Australian Securities & Investments Commission (ASIC) Class Order CO 03/1099 (Class Order) exemption (as extended in operation by ASIC Corporations (Repeal and Transitional Instrument 2016/396) for UK Financial Conduct Authority (FCA) regulated firms which exempts it from the requirement to hold an Australian financial services licence (AFSL) under the Corporations Act 2001 (Cth) (Corporations Act) in respect of the financial services we provide to you.
UK Regulatory Requirements
The financial services that we provide to you are regulated by the FCA under the laws and regulatory requirements of the United Kingdom which are different to Australia. Consequently any offer or other documentation that you receive from us in the course of us providing financial services to you will be prepared in accordance with those laws and regulatory requirements. The UK regulatory requirements refer to legislation, rules enacted pursuant to the legislation and any other relevant policies or documents issued by the FCA.
Your Status as a Wholesale Client
In order that we may provide financial services to you, and for us to comply with the Class Order, you must be a ‚wholesale client‘ within the meaning given by section 761G of the Corporations Act. Accordingly,
By accepting any documentation from us prior to the commencement of or in the course of us providing financial services to you, you:
warrant to us that you are a ‘wholesale client’; agree to provide such information or evidence that we may request from time to time to confirm your status as a wholesale client; agree that we may cease providing financial services to you if you are no longer a wholesale client or do not provide us with information or evidence satisfactory to us to confirm your status as a wholesale client; and agree to notify us in writing within 5 business days if you cease to be a ‚wholesale client‘ for the purposes of the financial services that we provide to you.
© EFG. All rights reserved
……………………………………………………………….
Source:
EFG Asset Management (UK) Ltd
efginternational.com
