Outlook 2025
The developed-world consumer is in excellent shape, and a plethora of new technologies and innovations (artificial intelligence included) is opening up whole new vistas of investment opportunities for corporates. Fiscal policy should remain a tailwind for growth, and monetary policy is set to ease further. An increase in trade tariffs is probable next year, but most of the impact on growth is likely to be felt in 2026 rather than 2025.
The global economy has proven remarkably resilient in recent years despite several large shocks. This bodes well for growth in 2025. The developed-world consumer has the potential to be a key contributor to this growth, while China’s weak housing market means it is likely to again disappoint.
Inflation fell sharply in 2024, driven overwhelmingly by declining goods inflation, but it could return in 2025. Higher tariffs and rising export prices on Chinese goods are expected to play key roles. The battle against inflation may not yet be over.
Policy rates across the developed world are expected to fall further. If inflation does reassert itself, central banks may pause sooner than markets are expecting, and the path back to neutral may be longer (and more winding) than many investors currently anticipate.
Healthy GDP growth and falling interest rates will create plenty of opportunities for investors in 2025, but policy and geopolitical volatility means they should stay flexible and nimble. In our Outlook 2025, we focus on where the opportunities may lie in each asset class.
A beneficiary of falling interest rates and healthy growth
The combination of falling interest rates and healthy global growth has historically been a powerful one for real estate returns. With valuations having made significant adjustments in recent years and the asset class unloved by many investors, 2025 could be a good year for real estate returns.
Well balanced between defensiveness and growth
Infrastructure has proven its resilience and reliability in recent years and with the macroeconomic tailwinds stronger in 2025, it should be a good year for returns and deal activity. GDP-correlated sectors such as transport and waste are likely to be the biggest beneficiaries.
Measuring the world
With interest rates expected to fall during 2025, equity valuations are likely to remain elevated. Earnings look set to drive healthy returns, supported by strong US and global growth and potential cost savings from new technologies such as AI.
Central bank easing cycle to provide support
While tight credit spreads and relatively aggressive market expectations for policy rate reductions may limit the upside in terms of returns, yields have remained elevated and a number of interesting opportunities are emerging in European and Australian sovereigns, emerging markets debt and private credit, where the risk-reward trade-off remains attractive.
Growth should be strong in the developed world in 2025, undergirded by policy tailwinds and a consumer that is in excellent shape. China, by contrast, remains challenged. Its housing market continues to deteriorate, consumer spending is slowing, and tariffs could have a significant impact on Chinese growth.
Source: Macrobond (November 2024).
While the consensus among policymakers and many investors is that the inflation challenge has been met, we disagree. Goods inflation is likely to return in 2025, and structurally there is a lot of upward pressure on inflation generally as a result of deglobalisation and demographics. Should inflation prove more buoyant and frustratingly stubborn than policymakers and investors are anticipating, this could be the story for 2025.
Source: Macrobond (November 2024). CPI = Consumer Price Index.
Public preferences for government spending levels have changed dramatically in the 21st century, and in 2025 fiscal policy in the US, UK, and Europe is likely to be materially looser than current projections suggest. This can’t go on forever, and investors should be on the lookout for adverse market reactions to all the coming supply – but it can go on for all of 2025.
Source: US Congressional Budget Office (CBO) (November 2024).
We expect further moderation of interest rates and robust economic growth in 2025, but we continue to believe we’ve transitioned to a ‘new normal’. A normal where neutral rates are likely to remain elevated relative to the past decade.”
Ben Way
Group Head, Macquarie Asset Management
Daniel McCormack
Head of Research
David Roberts
Head of Real Estate Strategy
Aizhan Meldebek
Global Infrastructure Strategist
Linda Bakhshian
Deputy CIO of Equities & Multi-Asset
Stefan Löwenthal
Head of Global Multi-Asset
Jürgen Wurzer
Deputy Head of Global Multi-Asset
Patrick Er
Economist
– Credit
Sophie Photios
Economist
– Credit
John Horner
Global Credit Strategist
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