eToro's investment outlook for 2025: moderate growth, lower interest rates, and the Musk factor
Investing.com -- Jean-Paul van Oudheusden, a market analyst at eToro, has shared his annual investment outlook for 2025. He expects the trends of moderate global growth, lower inflation, and lower interest rates from 2024 to continue into the new year. Central banks are anticipated to maintain their trend of lowering interest rates, influenced by fresh macroeconomic data.
Corporations, with interest rates still relatively high in historical comparison, are likely to weigh new investments carefully and concentrate on providing returns for shareholders. The S&P 500 Index is projected to have a strong earnings growth of 15% on average, while the European STOXX 600 Index is expected to grow by 7.5%.
Despite the optimistic outlook for equities and other risky assets, caution is recommended due to historically high valuations, especially for US stocks.
The return of Donald Trump to the White House on January 20, 2025, as the 47th President of the United States, could have significant economic implications. His advocacy for higher tariffs could potentially slow global growth, reintroduce inflation, and even cause supply chain disruptions. However, if Trump lives up to his reputation as a dealmaker, the growth outlook could shift positively.
The increase in government debt is another key factor to monitor. Bond investors are expected to demand higher returns if they perceive that balance sheets are not being managed responsibly. Higher-for-longer interest rates in the US could keep the US dollar strong for an extended period, negatively impacting Europe, Japan, India, and many emerging economies.
With the Trump-led Republican government controlling both chambers of Congress, more opportunities for productivity and streamlined decision-making are anticipated. Markets are expecting higher tariffs, lower taxes, and deregulation to be high on the agenda.
In 2025, the "Musk factor" is a new element to consider. Elon Musk's significant investment in the Trump campaign brings him closer to power than any businessman in history. This is expected to introduce a more libertarian, entrepreneurial spirit to politics, which could increase productivity but also introduce more risk.
Overall, the outlook for 2025 is cautiously optimistic, with it being the third consecutive positive year for equities. Returns may be less favorable than those in 2023 and 2024 due to high valuations, particularly for US equities. The technology sector is expected to be in full focus due to massive investments in chips and AI. The trade war is likely to dominate the news, and the development of commodity prices and geopolitical relationships will be closely watched.
Cyclical investment themes will persist as long as central banks continue to loosen monetary policy, but more structural investment themes are expected to emerge during the first half of the year. Sectors like healthcare and renewable energy are predicted to experience a power shift as early as January 20, 2025.
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Source: Investing.com
