ABN AMRO Investment Solutions
Trump’s tax cuts may enhance corporate profits, continuing the robust earnings trend from 2024.
Bank of America
BofA forecasts 124 rate cuts by central banks taking the global policy rate from 5% to 4%; the Fed predicted to cut rates two more times in the first half and then end its easing cycle in June; fiscal policies set to ease (German deficit to 3% GDP) or stay accommodative (US deficit 6-7% of GDP).
BCA Research
Our central case for US fiscal policy is likely to be bullish for growth and US corporate profits. If a moderate expansion in the deficit and deregulation are the only policies likely to be implemented next year (a replay of 2017), we would expect the US economy to continue to expand and equities to rise in 2025. That would warrant an overweight equity stance over a six- to 12-month time horizon.
BCA Research
Bond yields are likely to move significantly higher in an aggressive fiscal expansion scenario, but that is why moderate fiscal thrust is our base case view. Similarly, while tariffs typically raise prices, they could easily be deflationary on balance if they destabilize global economic activity. That favors a long duration stance.
BNP Paribas Asset Management
If interest rates do fall, we expect yield curves to remain steep and long-term rates relatively high. There are concerns about budget deficits, which look large for this stage of the cycle, but there currently appears to be little political appetite for fiscal prudence.
Capital Economics
Fiscal vulnerabilities constrain governments over the coming year – indeed, this is a key reason why we do not expect the Trump administration to enact the additional deficit-financed tax cuts that many now anticipate. If governments attempt to delay the fiscal tightening that the markets have already factored in, or push through fiscal expansion that adds to already large deficits, then 2025 could be the year when the “bond vigilantes” make their proper return.
Columbia Threadneedle
Major global economies – from the US, the UK and Japan to much of Europe – are running deficits of 5%-6% (despite Europe’s supposed 3% limit). That may be manageable if interest rates are low, but if deficits continue to rise and rates don’t come down as much as expected, financing the deficit becomes increasingly problematic. When this eventually becomes a focus, it will become a market-moving factor.
Comerica
The next Congress passes a major tax bill, combining extensions of some expiring provisions of the 2017 tax cut, reversal of some Biden-era tax increases, and follow-through on some tax-related campaign promises. Fiscal stimulus through tax cuts provides a significant incremental boost to disposable incomes and corporate profits, with pass-through to consumer spending and hiring.
Fidelity
What China does on stimulus — and with its stock of US Treasuries — looms large. A stabilizing Chinese economy is welcome news for Europe, but it will not lend enough strength to the continent to fully recover in the next 12 months, while the dollar is a crucial factor for emerging markets.
Jefferies
We believe that current market concerns over Trump fiscal expansion and tariff impact are exaggerated. We do see US fiscal deficits moving higher, but we believe that the fiscal policies will not be as negative as the market fears. Similarly, on tariffs, we see them more as a bargaining tool for Trump and do not think they would have as negative growth impact as is currently feared.
Macquarie
We expect the planned corporate tax cuts to be implemented quickly, boosting business investment and financial activity, and supporting yields. We also expect significant early action on immigration, although at this stage we assume that the impact on labor supply will be modest.
NatWest
Whilst there will be fewer elections to contend with in 2025, we expect markets to be no less volatile as they navigate the swing towards fiscal activism, terminal rates and global protectionism.
Neuberger Berman
The debt and deficit implications, and the question of whether capital is being well allocated, may surprise investors by being manageable concerns in 2025.
Pimco
High budget deficits will likely persist, limiting the potential for further fiscal stimulus and adding to economic risks. As developed economies slow and potential trade and geopolitical conflicts loom, investors should favor caution and flexibility in portfolio positioning.
Tallbacken Capital
Trump has promised tax breaks and seems intent to run a hot fiscal condition against the backdrop of 3% GDP and reasonably strong employment. Less regulation and potentially lower corporate taxes means more corporate capital for fixed asset investment, re-localizing key parts of the economy and reinforcing higher growth and inflation.
Wells Fargo
Tax cuts might be on the way for the US. The GOP sweep should allow Republicans to extend the TCJA, and possibly reduce tax rates even further.
Wells Fargo
China seems unlikely to enact a policy bazooka. However, we see direct stimulus and RMB depreciation to protect against tariffs and weak domestic demand.
Wells Fargo
European politics have several major catalysts on the horizon. German elections could be a positive catalyst for the euro zone if the debt brake is ended, and fiscal stimulus reinvigorates growth. However, French cohabitation poses a risk to the current minority government and past fiscal reforms.