A global wealth manager has predicted a severe downturn for the United States economy will not occur in 2025, but suggested investors will still need to monitor their portfolio allocations closely.
The State Street Global Advisors (SSGA) “2025 Global Market Outlook: Finding the Right Path” report forecast a soft landing for the US economy in the new year, with interest rate cuts and macroeconomic resilience being key elements.
“[This year] was no ordinary year, with elections around the world, persistent inflation and market volatility all playing their part in building an uncertain macroeconomic environment. Despite these challenges, markets continued to be resilient,” SSGA chief investment officer Lori Heinel noted.
“As we enter 2025, we remain cautiously optimistic, with expectations of a soft landing in the US looking set to translate into reality. While there are a range of uncertainties to contend with, investors may want to consider above-target allocations to equities and should remain thoughtful about portfolio construction.”
The investment manager expected the rate cut cycle that began in 2024 will continue into next year, but suggested the recently elected Trump administration could result in a change to the narrative in the latter part of 2025. It also cautioned long-standing economic and financial ties could be disrupted next year as a result of global geopolitical factors.
The report reflected an optimistic outlook for fixed income markets due to anticipated US interest rate cuts on the back of slowing economic output and less concerning inflation levels.
“While spreads across both investment-grade credit and high-yield debt are near historic lows, we are optimistic about prospects for fixed income assets next year and see a generally favourable environment for advanced-economy sovereign debt. Market sentiment swings and volatility could potentially create opportunities for investors to manage or extend duration,” SSGA global chief investment strategist Jennifer Bender said.
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