AXA IM: Trump-starting the global economy

AXA IM: Trump-starting the global economy

December 4, 2024

Outlook
Trump (Photo credits History in HD)

AXA Investment Managers has today published its Outlook for 2025 to 2026 with the following key points:

  • Global growth looks set to continue its 2024 pace of 3.2% in 2025, before easing in 2026 to 2.9%
  • Trump’s policies will determine the US outlook, but are uncertain for now. On balance these look set to weigh on growth in 2026. China is likely to need ongoing stimulus to deliver a managed decline. Eurozone activity should improve, but US trade tensions would be a risk. And Emerging economies (EM) will also be vulnerable.
  • Inflation is likely to be impacted by US policies, restricting the Fed’s space to ease. This could slow the pace of disinflation more broadly and in EMs – also slowing monetary easing. European inflation looks set to fall further and we expect the ECB to cut rates below neutral next year.
  • Broader risks will surround geopolitical developments, including developments in Ukraine, the Middle East and with China.

In its 2025-2026 Outlook, AXA Investment Managers provides views on the macro economy and investment strategy. In addition,  the asset manager’s experts discuss their perspectives per region ranging from the Eurozone, UK, US, and Canada to Japan, China and Emerging Markets.

'We project Eurozone GDP to grow by 1.0% in 2025 after 0.8% this year with a modest improvement in 2026 to 1.3%. But downside risks prevail. Moreover, we forecast the bloc’s inflation to undershoot the ECB’s target for most of 2025-2026. We expect the ECB to take an accommodative stance, cutting its deposit rate to 1.5% by the end of 2025, possibly sooner. Political (and policy) uncertainty remains high in several member states. Germany holds snap elections on 23 February 2025, although we do not see this as a likely game-changer,' François Cabau, Senior Economist Euro Area, explains.

'Our view is that Trump will not fully deliver what he suggested on tariff increases, migrant deportations or fiscal loosening. However, we anticipate enough delivery to materially impact US growth as these policies bite into 2026,' David Page, Head of Macro Research, adds.

'The global economic outlook is poised on the uncertain prospect of policy developments in Washington and Beijing. Our forecasts suggest overall global growth will remain at 3.2% in 2025, but softening to 2.8% in 2026. Next year, excluding China, global growth will be on a par with the post-global financial crisis (2012-2019) pace of activity, although this looks set to slow in 2026 with a more material slowdown in the US and some broader softening through EM. Yet there is a risk that this slowdown reflects renewed structural adjustment – notably from US supply adjustments – meaning, at least for the forecast horizon, relatively muted scope for policy easing and the prospect for relatively elevated term rates.'

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