Outlook 2025: Chris Iggo (AXA Investment Managers)
Outlook 2025: Chris Iggo (AXA Investment Managers)
By Chris Iggo, Chief Investment Officer, Core Investments, AXA Investment Managers
What are the main opportunities and threats for 2025?
‘The election of Donald Trump as US President creates uncertainties for investors. Expected policies challenge the ‘soft landing’ scenario, meaning potentially higher inflation and interest rates. There is also likely to be upward pressure on the dollar, especially against the euro, given that the path of interest rates between the US and Europe might diverge. More volatility in US interest rates is likely, which will challenge fixed income portfolios. Yields are likely to be higher in the US than in Europe and fundamentals for corporate fixed income remain solid. As such, returns in US bond markets should, on balance, be higher but more volatile. The US high yield market, with yields close to 8%, should remain an attractive asset class.
US policies should benefit the US economy and, therefore, US equities. Lower taxes and regulation might help performance of small caps and allow performance to be broader than the technology dominated returns seen over the last year. Equity investors in the US also need to assess the impact of higher bond yields and potential changes to policies like the Inflation Reduction Act.
Europe and the rest of the world will face higher US import tariffs. These are negative for growth. The ECB will need to cut rates aggressively. This suggests looking for opportunities in more domestic facing businesses in Europe. Credit and high yield should continue to be underpinned by solid financial performance and lower interest rates. Further afield, the focus will be on how China adapts and responds to increased US tariffs on Chinese goods. A substantial fiscal stimulus in China will provide some offset to US actions, again benefiting companies focused on domestic demand.'
The path of interest rates between the US and Europe might diverge.