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Invesco releases 2025 Investment Outlook “After the Landing”
(MENAFN- Weber Shandwick) Dubai, United Arab Emirates - 18 December 2024 – Invesco today released its 2025 Investment Outlook with insights on the expectations for global markets in 2025, along with asset implications across key economies.
New and old challenges remain, including geopolitical tensions and a new administration in the United States (US), which introduce uncertainties in the path ahead. The question remains whether central banks can steer the world’s major economies toward moderate growth while keeping inflation in check. The 2025 Outlook expects significant monetary policy easing to push global growth to re-accelerate, fostering an attractive environment for risk assets as central banks achieve a “soft landing” of lowering inflation without a recession.
Kristina Hooper, Chief Global Market Strategist at Invesco, commented: “After a steep climb to restrictive rates to curtail rapidly rising prices, central banks have all but declared victory over inflation. Yet many of the world’s major economies have been showing signs of slowing, with areas of weakness including slipping Eurozone Purchasing Managers’ Indexes, rising unemployment rates and faltering consumer confidence pushing central banks to cut interest rates in the latter half of the year. 2025 is likely to be framed by the push-and-pull between pockets of slowing economic activity due to accumulated rate hikes and the supportive effect of the rate cutting cycle.”
Base Case: Trend growth then reacceleration
It is expected that the US economy will continue to grow near its potential rate. A modest slowdown in growth to potential rates will continue in the near term, given the restrictive monetary policy environment that has persisted for several quarters and continues to this day, irrespective of recent policy changes. However, the resilient labor market and strong overall household balance sheets should help spending and the broader economy continue to grow. This, coupled with continued easing in financial conditions and continued real wage growth should help the US economy re-accelerate in 2025.
In the eurozone, recovery appears to have lost momentum in key economies like France and Germany, particularly in the manufacturing sector. The Eurozone continues to be weighed down by structural challenges and demographic issues, which suggest continued economic divergence from the US. Fiscal consolidation in France, Germany and Italy, as well as smaller eurozone economies, may also exert downward pressure on growth, investment, and consumption. The European Central Bank’s (ECB) interest rate cuts through 2025 should begin to reverse growth slowdown. Ms. Hooper added: “As we move through 2025, we anticipate that further rate cuts should help push economic growth up toward potential rates, supported by moderate real wage growth. The ECB currently seems to favor a gradual rate-cutting cycle, which, though positive for the economic picture, may delay growth improvement. Upside surprises elsewhere in the world, such as in China, would likely boost eurozone growth as a surplus economy.”
The Outlook is cautiously optimistic on the United Kingdom (UK) economy since it has shown surprising resilience in recent quarters after years of slow growth. The UK’s fiscal overhang remains a hurdle, and its relatively more stubborn inflation outlook suggests the Bank of England will need to keep rates relatively high. Nevertheless, rate cuts should help the UK consumer and lift housing market activity, delivering decent growth as inflation continues to trend lower and real wages rise.
New and old challenges remain, including geopolitical tensions and a new administration in the United States (US), which introduce uncertainties in the path ahead. The question remains whether central banks can steer the world’s major economies toward moderate growth while keeping inflation in check. The 2025 Outlook expects significant monetary policy easing to push global growth to re-accelerate, fostering an attractive environment for risk assets as central banks achieve a “soft landing” of lowering inflation without a recession.
Kristina Hooper, Chief Global Market Strategist at Invesco, commented: “After a steep climb to restrictive rates to curtail rapidly rising prices, central banks have all but declared victory over inflation. Yet many of the world’s major economies have been showing signs of slowing, with areas of weakness including slipping Eurozone Purchasing Managers’ Indexes, rising unemployment rates and faltering consumer confidence pushing central banks to cut interest rates in the latter half of the year. 2025 is likely to be framed by the push-and-pull between pockets of slowing economic activity due to accumulated rate hikes and the supportive effect of the rate cutting cycle.”
Base Case: Trend growth then reacceleration
It is expected that the US economy will continue to grow near its potential rate. A modest slowdown in growth to potential rates will continue in the near term, given the restrictive monetary policy environment that has persisted for several quarters and continues to this day, irrespective of recent policy changes. However, the resilient labor market and strong overall household balance sheets should help spending and the broader economy continue to grow. This, coupled with continued easing in financial conditions and continued real wage growth should help the US economy re-accelerate in 2025.
In the eurozone, recovery appears to have lost momentum in key economies like France and Germany, particularly in the manufacturing sector. The Eurozone continues to be weighed down by structural challenges and demographic issues, which suggest continued economic divergence from the US. Fiscal consolidation in France, Germany and Italy, as well as smaller eurozone economies, may also exert downward pressure on growth, investment, and consumption. The European Central Bank’s (ECB) interest rate cuts through 2025 should begin to reverse growth slowdown. Ms. Hooper added: “As we move through 2025, we anticipate that further rate cuts should help push economic growth up toward potential rates, supported by moderate real wage growth. The ECB currently seems to favor a gradual rate-cutting cycle, which, though positive for the economic picture, may delay growth improvement. Upside surprises elsewhere in the world, such as in China, would likely boost eurozone growth as a surplus economy.”
The Outlook is cautiously optimistic on the United Kingdom (UK) economy since it has shown surprising resilience in recent quarters after years of slow growth. The UK’s fiscal overhang remains a hurdle, and its relatively more stubborn inflation outlook suggests the Bank of England will need to keep rates relatively high. Nevertheless, rate cuts should help the UK consumer and lift housing market activity, delivering decent growth as inflation continues to trend lower and real wages rise.
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