Invesco Releases 2025 Investment Outlook "After the Landing"
Invesco's 2025 Investment Outlook presents three scenarios for global markets. The base case anticipates significant monetary policy easing fostering an attractive environment for risk assets as central banks achieve a 'soft landing.' The outlook expects US economy to grow near potential rate, with Fed lowering policy rates toward neutral in 2025. While Eurozone faces structural challenges, rate cuts should help push economic growth up. Japan is expected to reaccelerate in 2025, while China may see modest deceleration. The outlook favors overweight to risky assets, particularly cyclicals and smaller caps, with attractive opportunities in bonds despite tight spreads.
Il Outlook di Investimento 2025 di Invesco presenta tre scenari per i mercati globali. Il caso base prevede un significativo allentamento della politica monetaria che favorisce un ambiente attraente per gli attivi a rischio mentre le banche centrali raggiungono un 'atterraggio soft'. Le previsioni indicano che l'economia statunitense crescerà vicino al tasso potenziale, con la Federal Reserve che ridurrà i tassi verso un livello neutro nel 2025. Mentre la zona euro affronta sfide strutturali, i tagli dei tassi dovrebbero favorire un aumento della crescita economica. Si prevede che il Giappone accelererà nuovamente nel 2025, mentre la Cina potrebbe affrontare una modesta decelerazione. Le previsioni privilegiano un sovrappeso sugli attivi rischiosi, in particolare nei ciclici e nelle piccole capitalizzazioni, con opportunità attraenti nei titoli obbligazionari nonostante gli spread ristretti.
El Panorama de Inversión 2025 de Invesco presenta tres escenarios para los mercados globales. El escenario base anticipa un significativo alivio en la política monetaria que fomenta un entorno atractivo para los activos de riesgo en la medida que los bancos centrales logran un 'aterrizaje suave'. Se espera que la economía de EE. UU. crezca cerca de su tasa potencial, con la Reserva Federal reduciendo las tasas hacia un nivel neutral en 2025. Mientras la Eurozona enfrenta desafíos estructurales, las reducciones en las tasas deberían ayudar a impulsar el crecimiento económico. Se espera que Japón vuelva a acelerar en 2025, mientras que China podría ver una desaceleración modesta. El pronóstico favorece un sobrepeso en activos riesgosos, particularmente en cíclicos y pequeñas capitalizaciones, con oportunidades atractivas en bonos a pesar de los spreads ajustados.
인베스코의 2025년 투자 전망은 글로벌 시장에 대한 세 가지 시나리오를 제시합니다. 기본 사례는 중앙은행이 '소프트 랜딩'을 이루는 가운데 리스크 자산을 위한 매력적인 환경을 조성하는 유의미한 통화 정책 완화를 예상합니다. 전망은 미국 경제가 잠재 성장률 근처에서 성장할 것으로 예상하며, 2025년에는 연방준비제도가 중립적인 수준으로 정책금리를 낮출 것입니다. 유로존은 구조적 도전에 직면해 있지만, 금리 인하가 경제 성장을 촉진하는 데 도움이 될 것입니다. 일본은 2025년에 다시 가속화될 것으로 보이며, 중국은 다소의 둔화를 겪을 수 있습니다. 전망은 리스크 자산에 대한 비중을 높이는 것을 우선시하며, 특히 경기 순환주와 소형주에서 매력적인 기회를 찾고, 타이트한 스프레드에도 불구하고 채권에서의 기회를 선호합니다.
Les Perspectives d'Investissement 2025 d'Invesco présentent trois scénarios pour les marchés mondiaux. Le scénario de base anticipe un assouplissement significatif de la politique monétaire, favorisant un environnement attrayant pour les actifs risqués, alors que les banques centrales atteignent un 'atterrissage en douceur'. Les perspectives s'attendent à ce que l'économie américaine croisse près de son taux potentiel, la Réserve fédérale réduisant les taux d'intérêt vers un niveau neutre en 2025. Alors que la zone euro fait face à des défis structurels, les baisses de taux devraient aider à stimuler la croissance économique. Le Japon devrait connaître une réaccélération en 2025, tandis que la Chine pourrait afficher une décélération modérée. Les prévisions privilégient un surpoids d'actifs risqués, notamment les cycliques et les petites capitalisations, avec des opportunités attractives dans les obligations malgré des spreads serrés.
Investkos Investitionsausblick 2025 präsentiert drei Szenarien für die globalen Märkte. Der Basisfall geht von einer signifikanten Lockerung der Geldpolitik aus, die ein attraktives Umfeld für Risikofinanzierungen schafft, während die Zentralbanken eine 'sanfte Landung' erreichen. Die Prognose erwartet, dass die US-Wirtschaft nahe ihrer potenziellen Wachstumsrate wächst, während die Fed die Zinssätze bis 2025 in Richtung neutrale Niveaus senkt. Während die Eurozone vor strukturellen Herausforderungen steht, sollten Zinssenkungen helfen, das Wirtschaftswachstum zu unterstützen. Japan wird voraussichtlich 2025 wieder an Fahrt gewinnen, während China eine moderate Verlangsamung erleben könnte. Die Prognose bevorzugt eine Übergewichtung risikobehafteter Anlagen, insbesondere zyklischer und kleinerer Werte, mit attraktiven Möglichkeiten bei Anleihen trotz enger Spreads.
- Expected monetary policy easing to foster attractive environment for risk assets
- US economy projected to grow near potential rate with strong household balance sheets
- Anticipated Fed rate cuts toward neutral in 2025
- Favorable outlook for bonds and credit markets
- Strong fundamentals supporting fixed income assets
- Eurozone facing structural challenges and demographic issues
- China's property sector constraints affecting consumption and investment
- Risk of policy mistakes causing global growth to undershoot
- Potential inflation resurgence threatening economic outlook
- Trade frictions potentially affecting Chinese export growth
Insights
The 2025 Investment Outlook from Invesco presents a constructive base case scenario with significant implications for investors. The forecast of monetary policy easing combined with controlled inflation suggests a favorable environment for risk assets. Key highlights include:
- Expected Fed rate cuts moving toward neutral in 2025
- Projected US economic growth outperformance versus other developed markets
- Favorable outlook for cyclicals and small-caps due to attractive valuations
- Opportunities in emerging markets, particularly India
- Potential weakness in the US Dollar as Fed easing progresses
The analysis suggests strategic positioning in longer-duration bonds, high-quality high yield credit and select real estate opportunities. Japanese and UK equities appear particularly attractive on relative valuations. However, investors should monitor key risks including policy uncertainty, Chinese property sector challenges and potential inflation resurgence.
- Base case. Expect significant monetary policy easing to foster an attractive environment for risk assets as central banks achieve a "soft landing" of lowering inflation without a recession.
- Downside scenario. Risk of a policy mistake that causes global growth to undershoot but central banks may enact more rate cuts to counteract it.
- Upside scenario. Potential for global growth to be stronger than expected. Falling inflation and rate cuts could help drive a "Goldilocks" environment across most economies.
New and old challenges remain, including geopolitical tensions and a new administration in
Kristina Hooper, Chief Global Market Strategist at Invesco, commented: "After a steep climb to restrictive rates to curtail rapidly rising prices, central banks have all but declared victory over inflation. Yet many of the world's major economies have been showing signs of slowing, with areas of weakness including slipping Eurozone Purchasing Managers' Indexes, rising unemployment rates and faltering consumer confidence pushing central banks to cut interest rates in the latter half of the year. 2025 is likely to be framed by the push-and-pull between pockets of slowing economic activity due to accumulated rate hikes and the supportive effect of the rate cutting cycle."
Base Case: Trend growth then reacceleration
It is expected that the US economy will continue to grow near its potential rate. A modest slowdown in growth to potential rates will continue in the near term, given the restrictive monetary policy environment that has persisted for several quarters and continues to this day, irrespective of recent policy changes. However, the resilient labor market and strong overall household balance sheets should help spending and the broader economy continue to grow. This, coupled with continued easing in financial conditions and continued real wage growth should help the US economy re-accelerate in 2025.
The Base Case believes the Federal Reserve (Fed) will lower its policy rate toward neutral in 2025, reducing the downward pressure of higher interest rates on growth. The Fed also has additional room for further policy easing, laying a positive backdrop for economic momentum through 2025.
In
Ms. Hooper noted: "Since mid-2024, views about the trajectory of US economic growth have been rotating between pessimism and optimism in fits and starts. We continue to expect the US to deliver higher growth than other developed economies, largely due to the combination of its favorable demographics and immigration, its business dynamism, and its healthy rate of productivity growth."
In the eurozone, recovery appears to have lost momentum in key economies like
Ms. Hooper added: "As we move through 2025, we anticipate that further rate cuts should help push economic growth up toward potential rates, supported by moderate real wage growth. The ECB currently seems to favor a gradual rate-cutting cycle, which, though positive for the economic picture, may delay growth improvement. Upside surprises elsewhere in the world, such as in
The Outlook is cautiously optimistic on the
With inflation and wage growth seeing a revival,
The Outlook anticipates that
The property sector will likely continue constraining strength in
US rate cuts, global monetary easing,
The Outlook believes that
Investment Implications
Given the positive macro backdrop, the Outlook favors an overweight to risky assets while remaining cognizant of the high valuations for some assets.
Within equities, cyclicals and smaller caps are favored given lower valuations and greater sensitivity to the economic cycle, as well as developed ex-US – especially
Bonds offer attractive opportunities despite tight spreads, especially for longer holdings periods. Strong fundamentals underpin many fixed income assets, helping to explain extremely tight credit spreads in both investment grade and high yield credit. To take advantage of the resilient and improving growth backdrop, some credit risk such as higher quality high yield is favored. The diversification properties of bank loans are also attractive given the near-zero duration; and expectation to be relatively immune to interest rate volatility. Strong performance from emerging market local currency bonds is also anticipated.
Opportunities are increasing in real estate, as there could be meaningful upside potential as the environment improves and rates ease. Among commodities, base metals are favored given their sensitivity to the economic cycle. Within currencies, the US Dollar should begin to weaken this year as the Fed continues to cut rates, which would favor currencies such as the Japanese yen and the British pound.
Alternate Scenarios
There is the potential that the Base Case is not realized hence the Outlook contemplates alternate scenarios.
In a downside scenario, there is a risk that a policy mistake could cause global growth to undershoot, which could presage a sustained growth deceleration in key economies, including the US. However, if activity falters, central banks will likely enact more rate cuts to counteract a growth slowdown, resulting in below-trend performance in the first half of the year, followed by a pick-up towards trend in the latter half of the year. In this scenario, a defensive positioning favoring US stocks, longer duration Treasuries, gold and 'safe haven' currencies such as the US dollar and Japanese yen are preferred.
Conversely, an upside scenario could occur where falling inflation and rate cuts help accomplish a 'Goldilocks' environment, leading to a period of growth above potential and across most major economies while inflation remains near target rates. In this scenario, a more 'risk on' positioning favoring emerging market equities, including Chinese equities, bank loans, industrial commodities and energy, and 'commodity currencies' such as the Canadian dollar and the Australian dollar are preferred.
Swing Factors
The Outlook remains watchful for additional factors that can impact expectations for the path ahead.
Policy uncertainty on tariffs and immigration has increased and there is the potential for higher market volatility that could cause disruptions to the global economy. These policy shifts have the potential to amplify growth – and inflation – which could in turn impact the trajectory of Fed policy.
A pick-up in Chinese policy stimulus could raise upside potential, which could have positive spillovers to the global economy and equities. The Outlook remains watchful for further shifts in investor sentiment sparked by recent policy momentum.
Inflation while falling, could return and spark a sea-change in the current outlook and recalibrate expectations around policy easing and the resulting boost to the economy. Trump administration policies on trade and immigration as well as pro-growth policies could also create inflationary forces.
Recent above-potential growth in key economies was driven in part by large-scale fiscal spending. Now, despite a more normal macro environment compared to the pandemic era, the fiscal taps remain largely open. If governments curtail government spending to rein in deeply expansionary fiscal policy, it may cause growth headwinds to build which would limit the degree of reacceleration expected in 2025.
About Invesco
Invesco Ltd. is a global independent investment management firm dedicated to delivering an investment experience that helps people get more out of life. Our distinctive investment teams deliver a comprehensive range of active, passive, and alternative investment capabilities. With offices in more than 20 countries, Invesco managed
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All data are sourced from Invesco dated October 31, 2024, unless otherwise stated. This document contains general information only. It is not an invitation to subscribe for shares in a fund nor is it to be construed as an offer to buy or sell any financial instruments. Nor does this constitute a recommendation of the suitability of any investment strategy for a particular investor. While great care has been taken to ensure that the information contained herein is accurate, no responsibility can be accepted for any errors, mistakes or omissions or for any action taken in reliance thereon. Investment involves risks. Past performance is not indicative of future performance.
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Past performance does not guarantee future results.
Investments cannot be made directly in an index.
This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional before making any investment decisions.
Diversification does not guarantee a profit or eliminate the risk of loss.
In general, stock values fluctuate, sometimes widely, in response to activities specific to the company as well as general market, economic and political conditions.
The risks of investing in securities of foreign issuers, including emerging market issuers, can include fluctuations in foreign currencies, political and economic instability, and foreign taxation issues.
Investments in companies located or operating in
Stocks of small- and mid-sized companies tend to be more vulnerable to adverse developments, may be more volatile, and may be illiquid or restricted as to resale.
Businesses in the energy sector may be adversely affected by foreign, federal, or state regulations governing energy production, distribution, and sale as well as supply-and-demand for energy resources. Short-term volatility in energy prices may cause share price fluctuations.
Alternative products typically hold more non-traditional investments and employ more complex trading strategies, including hedging and leveraging through derivatives, short selling and opportunistic strategies that change with market conditions. Investors considering alternatives should be aware of their unique characteristics and additional risks from the strategies they use. Like all investments, performance will fluctuate. You can lose money.
Commodities may subject an investor to greater volatility than traditional securities such as stocks and bonds and can fluctuate significantly based on weather, political, tax, and other regulatory and market developments.
Fixed income investments are subject to credit risk of the issuer and the effects of changing interest rates. Interest rate risk refers to the risk that bond prices generally fall as interest rates rise and vice versa. An issuer may be unable to meet interest and/or principal payments, thereby causing its instruments to decrease in value and lowering the issuer's credit rating.
High yield bonds, or junk bonds, involve a greater risk of default or price changes due to changes in the issuer's credit quality. The values of junk bonds fluctuate more than those of high quality bonds and can decline significantly over short time periods.
Fluctuations in the price of gold and precious metals may affect the profitability of companies in the gold and precious metals sector. Changes in the political or economic conditions of countries where companies in the gold and precious metals sector are located may have a direct effect on the price of gold and precious metals.
Investments in real estate-related instruments may be affected by economic, legal, or environmental factors that affect property values, rents or occupancies of real estate. Real estate companies, including REITs or similar structures, tend to be small and mid-cap companies and their shares may be more volatile and less liquid.
The health care industry is subject to risks relating to government regulation, obsolescence caused by scientific advances, and technological innovations.
Credit risk is the risk of default on a debt that may arise from a borrower or issuer of bonds failing to make required payments.
Credit spread is the difference in yield between bonds of similar maturity but with different credit quality.
Disinflation, a slowing in the rate of price inflation, describes instances when the inflation rate has reduced marginally over the short term.
Duration is a measure of the sensitivity of the price (the value of principal) of a fixed income investment to a change in interest rates. Duration is expressed as a number of years.
Idiosyncratic developments refer to unique events that do not affect an entire market or portfolio.
Inflation is the rate at which the general price level for goods and services is increasing.
Interest rate volatility measures the extent to which interest rates change over time.
Monetary easing refers to the lowering of interest rates and deposit ratios by central banks.
A policy rate is the rate used by central banks to implement or signal their monetary policy stance.
The Prices Paid sub-index of the ISM Services PMI tracks changes in the prices paid by services industries for various raw materials and goods.
Purchasing Managers' Indexes (PMI) are based on monthly surveys of companies worldwide and gauge business conditions within the manufacturing and services sectors.
A risk asset is generally described as any financial security or instrument that carries risk and is likely to fluctuate in price.
Risk-on refers to price behavior driven by changes in investor risk tolerance; investors tend toward higher risk investments when they perceive risk as low.
Spread represents the difference between two values or asset returns.
Tightening monetary policy includes actions by a central bank to curb inflation.
Safe havens are investments that are expected to hold or increase their value in volatile markets.
The yield curve plots interest rates, at a set point in time, of bonds having equal credit quality but differing maturity dates to project future interest rate changes and economic activity.
The opinions expressed are those of the author, are based on current market conditions and are subject to change without notice. These opinions may differ from those of other Invesco investment professionals. These comments should not be construed as recommendations, but as an illustration of broader themes. Forward- looking statements are not guarantees of future results. They involve risks, uncertainties and assumptions; there can be no assurance that actual results will not differ materially from expectations.
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