All eyes on Trump

After a successful 2024, there are several themes that will drive financial markets in the coming year. What will Trump bring for the world economy? Will inflation continue to decline? Will the earnings momentum continue? All important questions. Given the current resilience of the world economy and especially the US, we remain moderately positive and slightly overweight on equities and bonds.
- Disruptor-in-chief: Trump after inauguration
- Equities: US remains strong
- European bonds benefit from lower interest rates
Disruptor-in-chief: Trump after inauguration
After a convincing election where Trump won both Congress and the presidency, he has talked about new tariffs, buying Greenland, and even suggesting Canada and Mexico to become new US states. If there is one thing certain amidst all uncertainty, it is that the coming four years will not be boring. We anticipate seeing a ‘moderate Trump’, who will implement tariffs, although they may not be as high and extensive as he has stated so far. Especially for Europe, we expect that tariffs to be more targeted, focussing on specific products or sectors. Overall, this will lead to frontloading at the beginning of the year with exports to the US increasing ahead of tariffs. As of spring, the effects of tariffs would be felt, and slowing down European and Chinese growth.
Equities: US remains strong
We expect the world economy to grow in the coming year, which will support corporate profits. Also here the US is leading. Meanwhile, we expect central banks to lower interest rates further this year. This supports equity markets, leading us to adopt a slightly overweight position on equities.
Earnings and economic data from the US remain positive, while Europe is still in recovery. Additionally, US import tariffs could result in a greater economic divergence between these regions with US experiencing greater economic growth but also higher inflation. Therefore, we continue to prefer US equities over European ones. Our outlook on emerging markets is neutral, partly due to mixed signals from the Chinese economy. At the sector level, we see opportunities in information technology, financials and healthcare, while we are cautious on materials and consumer staples.
European bonds benefit from lower interest rates
Our conviction is that interest rates will decline in 2025, particularly in Europe, due to falling eurozone inflation and slowing growth when tariffs are implemented, which should allow the European Central Bank (ECB) to continue lowering policy interest rates. We expect US interest rates to decline at a slower pace than in Europe, as import tariffs and a stronger economy could drive US inflation. Therefore, we remain overweight European quality bonds, which will benefit from falling rates. Within high-quality bonds we prefer corporate bonds over government bonds. We are cautious about riskier bonds like high yield bonds and emerging market debt, as we view those to be too expensive from a risk perspective.
Erik Joly
Chief Investment Officer