The risk of a recession has been in the crosshairs of investors for almost two years; however, it has never materialised, particularly in the United States.
On the contrary, the US economy outperformed other developed countries. This desynchronization with the rest of the world is set to continue in 2025. The policies that will be put in place by the new administration and the Congress should indeed be reflationary. In other words, such policies should further boost economic growth through tax cuts and could generate more inflation.
In terms of asset allocation, the return of a negative correlation between equity and bond markets means that a well-balanced portfolio can once again perform satisfactorily, while cushioning market shocks. In the longer term, the phase of economic normalisation calls for greater diversification of equity exposure, beyond large technology companies with a high concentration risk. On a risk-adjusted basis, bond markets remain attractive, despite the current phase of global monetary policy normalisation.
Discover our Outlook 2025.
