Outlook gives insight into the themes that Global X believes will resonate with the economic and policy environment over the year ahead with perspective on asset allocation solutions
NEW YORK, Dec. 9, 2024 -- Global X Management Company LLC (Global X), today released its 2025 Investment Outlook – Built Different: 2025 and the Next Phase of the Mid-Cycle Expansion, exploring the interesting blend of optimism, improving investor sentiment and economic policy uncertainty for the year ahead.
Consistent with last year's outlook, Global X believes economic growth is likely to surprise on the upside in 2025. Struggling sectors like manufacturing, paired with renewed small- and mid-cap corporate investment, could extend the mid-cycle expansion, translating to better market breadth with higher multiples. That said, interest rate volatility, which tends to rise in protectionist periods with considerable tariffs, is a potential risk to that outlook.
Economic uncertainty is likely to remain as financial markets weigh the tradeoffs and net effects of lower taxes, higher tariffs, reduced immigration, more stimulus, and less regulation. Yet Global X sees an opportunity for investors to target themes tied to U.S. competitiveness that will likely resonate in the economic and policy backdrop ahead.
"There are good reasons for optimism on the global economy and financial markets, but next year is likely to bring a new set of challenges that require diligence," said Scott Helfstein, SVP, Head of Investment Strategy at Global X. "Strength in the services sector, enhanced corporate investment, and a resilient consumer paint a picture of robust economic potential, yet economic uncertainty abounds. The net impact of higher tariffs, lower taxes, deregulation, and less immigration could stimulate the economy, with simultaneous implications for inflation and interest rates."
Helfstein continued: "Given elevated uncertainty, an allocation strategy that aligns with a few key themes tied to the shifting political economic backdrop may offer reasonable upside while also providing a degree of insulation from potential volatility. Infrastructure, defense tech, energy independence, and automation tied to manufacturing onshoring will tie in closely with improving the U.S. competitive position."
Key Insights:
- 2024 Inspection: Services and Investment
- Consumer resilience has remained strong with consumption accelerating to 3.8% in the third quarter.
- Mega-caps, especially in tech, were the standouts, with a rising stream of capital flowing to data centers, AI, and technology to embed themselves into the infrastructure of the automation age.
- Companies continued investing in new technology to drive efficiency even if the pace slowed modestly.
- The three pillars of the economy, labor, leverage, and liquidity, seem relatively sound going into next year.
- 2025 Outlook: Economic Uncertainty Abounds
- The mixture of forces that will mold the economy in 2025 will likely be quite different than in 2024. The status quo could be upended as the net impact of higher tariffs, lower taxes, deregulation, and less immigration is tough to discern.
- Historically, the negative effects of tariff increases can be observed at the household level. Real disposable income growth slows while debt levels increase faster when import duties increase faster than the long-term average of 2%.
- Stricter immigration standards could help to reinforce the strong labor market with fewer available employees. Should demand outrun supply, then labor costs could increase. This would run contrary to the Fed's goal of slowing wage inflation.
- Deregulation is also top of mind for investors and companies. This could unlock pent up investment and help industries restructure for the future, or it could amount to little more than a hill beans. A looser regulatory environment should encourage companies to build and invest.
To read the full outlook, please visit our website here.
About Global X Management Company LLC
Global X Management Company LLC is a New York-based investment management firm that was founded in 2008 with over $55 billion in assets under management as of December 4, 2024. For more than fifteen years, our mission has been empowering investors with unexplored and intelligent solutions.
Global X is a member of Mirae Asset Financial Group, a global leader in financial services, with more than $600 billion in assets under management worldwide.i
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