Q1 2025 Equity Market Outlook

2025-01-09 03:50:00 ET

Summary

• We expect M&As are set for a big comeback, thanks to a mix of supportive economic and financial conditions, as well as a more favorable regulatory regime.
• Recent data suggests to us that global industrial activity will gain momentum and the manufacturing recession will end in 2025, potentially spurring an increase in capital expenditures and market broadening in favor of value stocks and small caps.
• Stimulative financial conditions and fiscal policy could also add to growth in 2025, in our view.
• We believe key risks in the U.S. include market concentration, rich valuations and stretched equity positioning.

By Raheel Siddiqui

We believe a strong economy, rebounding industrial activity, improving liquidity and rising animal spirits should continue to support corporate earnings growth and a broadening of the U.S. equity market in the coming year.

Investment Themes and Views[1]

We have retooled the methodology behind our equity recommendations to provide more actionable guidance for active asset allocators and portfolio managers. Our methodology is designed to assess developing risk and opportunity cycles at the index and subcomponent levels (countries, sectors, regions and styles) and be more responsive to changes in market sentiment. The targeted investment horizon for these recommendations is approximately 12 months, but we expect more frequent adjustments at the sub-index level.

The Economy Looks Strong as We Enter 2025

As we approach 2025, we believe several important economic indicators point to a robust economy and broadening earnings growth....

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