Horizon Q1│2025 - Berenberg

Key statements of the outlook

Rates turnaround helps

The looser monetary and fiscal policy worldwide should support the economy and allow the markets to continue to count on a favourable economic environ-ment. The risks lie in US trade and foreign policy, as well as in the development of inflation and national debt. The further rate path and the Fed’s policy are
therefore subject to a high degree of uncertainty.

Reallocation forword

In 2024, investors have again put a lot of money into short-term interest-bearing investments such as money market funds and time deposits, but interest rates are falling. In 2025, they could turn to other investments and gold, corporate bonds and equities could benefit.

A tougher bull market

With positive earnings growth and more corporate takeovers, the stock markets still have some potential. However, given the political risks, setbacks and higher volatility are likely, as valuations are high and investor sentiment and positioning are optimistic.

Dear readers,

“Challenging, but with opportunities” was the title of our outlook for 2024. In the first half of the year, the changing market narrative between fears of excessively strong and excessively weak US growth, the resulting sharp fluctuations in bond yields and the low market breadth proved particularly challenging. Throughout the year, markets wrestled with the question of whether the US economy would achieve a soft landing. Ultimately, economic performance in 2024 was better than expected in many regions, especially in the US, and 10-year government bond yields rose despite central banks cutting interest rates. Investors were offered numerous opportunities. Gold, equities and industrial metals all posted double-digit gains. We had expected equity markets to reach new highs, but the extent surprised us. Almost all bond segments also posted gains, led by corporate and high-yield bonds. Investors who relied on short-term interest-bearing investments such as time deposits were left behind.

What can investors expect in 2025? Lower inflation rates, falling central bank rates, especially in Europe, and likely new fiscal stimulus suggest a market-friendly economic environment, positive earnings growth and a continuation of the equity bull market. However, a lot of good news is already priced into US equities, investor sentiment and positioning are optimistic, and there is a high level of uncertainty regarding US trade and foreign policy and the US national debt under President Trump. The risks for the markets are by no means only to the downside, as for example the much-discussed tariffs, falling immigration or the increasing tensions between the US and China. For example, if the situation surrounding Russia’s war in Ukraine and the conflict in the Middle East eases, energy prices should fall, central banks should lower interest rates more sharply and economies should perform better, particularly in Europe. US deregulation under President Trump, a new government in Germany or stronger fiscal policy measures in China could also provide positive impetus. An increase in corporate takeovers and a reallocation of investor funds from short-term interest-rate investments should also provide support.

We therefore expect the bull market in equities to continue, but that the third year will be more volatile and difficult, with more setbacks and less potential for equities. In particular, President Trump’s inauguration could make investors more cautious. This is because the clear election result could be seen by him as a mandate to push through his policies quickly and without compromise, which could weigh on the capital markets, at least temporarily. Bonds are likely to produce only moderate gains in 2025, while gold will remain supported by increased uncertainty and central bank purchases. We are confident that broad multi-asset portfolios will continue to outperform short-term interest-rate investments by a wide margin in 2025 despite all the uncertainties and risks.

In the Insights interview starting on page 14, Vincent Kalmes, Head of Multi Asset Internal Advisory, talks about how investment ideas are developed and refined for the advisory business at Berenberg.

All the best for 2025!

Publisher

Prof. Dr. Bernd Meyer

Chief Investment Strategist and Head of Multi Asset

Phone +49 69 91 30 90-225

Write email

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Date: 13 December 2024