As 2025 approaches, several foreign institutions such as BlackRock, Schroeder, Lianbo, and Manulife Investment have provided prospects for global market opportunities in the coming year.
In terms of the stock market, global stock markets have shown strong growth potential, especially emerging markets have become the focus of investors' attention. Non US markets may alleviate some adverse effects and drive global stock markets to improve through monetary stimulus measures.
In terms of the bond market, diversified investment strategies and high-yield bonds will become investment hotspots in 2025. The continuous decline in global inflation and the gradual interest rate cuts by central banks around the world have injected positive momentum into the bond market, making it possible for diversified bond investment portfolios to achieve stable returns.
Industry insiders believe that despite the optimistic market outlook, investors still need to remain cautious while pursuing returns. The global economic environment is complex and ever-changing, and geopolitical risks and market volatility still exist. Reasonably allocating assets and focusing on emerging markets and diversified investment strategies will help investors achieve steady growth and returns in 2025.
The stock market is expected to bring positive returns, and emerging markets may lead growth
For the global stock market situation in 2025, Schroeder believes that we should focus on emerging markets and seize opportunities for returns.
Schroeder pointed out that the overall valuation of the S&P 500 index is currently on the high side. After Trump takes office in January next year, if he fully implements the high tariff policy he claimed during his campaign, trade in markets outside the United States will become a major focus. However, widespread tariffs may be difficult to fully implement at the legal level, and the related uncertainty will encourage more American companies to relocate their production activities back home, thereby boosting US economic growth.
In this context, Schroeder believes that there is still room for expansion in the overall investment market in the United States, especially in the context of the Trump administration's policy of relaxing regulations and reducing corporate taxes. Schroeder reminds investors that although they expect the economy to achieve a "soft landing," they still need to be wary of the risk of the economy overheating. For example, policies that restrict immigration and promote business growth may exacerbate local inflationary pressures, thereby limiting the space for the Federal Reserve to cut interest rates.
In addition, the yield of the US 10-year treasury bond bonds remains at around 4.5% to 5%, which may inhibit the return speed of the stock market, because the higher bond yield will not only attract capital outflow from the stock market, but also increase the borrowing costs of enterprises, thus weakening the attractiveness of the stock market.
Schroeder expects that although Trump's high tariff policy may exert pressure on neighboring countries, non US markets will adopt further monetary stimulus measures, which can to some extent offset this impact. Therefore, overall, the stock market is still expected to bring positive returns in 2025.
For investors, in addition to focusing on excellent assets in the near future, they can also explore potential investment opportunities in other emerging markets, especially non US markets and small and medium-sized stocks with more attractive valuations. Market expectations suggest that corporate profit growth in most regions of the world will improve by 2025, but investors should also be aware that market risks are rising, especially as current valuations gradually reflect optimistic expectations.
Lianbo emphasizes the importance of corporate profitability from the perspective of industry sectors.
Huang Senwei, a senior market strategist at Lianbo Fund, said that the profit growth of the information technology industry is still rapid, with expected growth rates of 18% and 23% in 2024 and 2025, respectively. Therefore, he is optimistic about the US technology sector. However, the overvaluation of American technology companies means that their fault tolerance is low, and in this case, attention should be paid to investment opportunities outside of technology stocks.
Huang Senwei suggests that investors can turn their attention to fields such as healthcare, industrial sectors, and small cap stocks. In addition, from the perspective of investment style, value stocks are also worth paying attention to next year. The diversified layout of these sectors and styles helps to diversify risks and capture more potential investment opportunities.
Manulife Investment has a cautious view on the global stock market. Overall, in a complex macroeconomic environment, the market continues to fluctuate. Entering the fourth quarter of 2024, geopolitical risks and a slowdown in global growth may pose resistance to high-risk assets.
Specifically, Manulife Investment has raised its allocation expectations for Canadian stocks and raised its stock expectations for the Asia Pacific region (excluding Japan) to a more optimistic level. In addition, in terms of commodity stocks, although valuations have improved, there may be short-term risks due to supply and demand concerns. Therefore, Manulife Investment has adjusted its view from optimistic to neutral.
From a market perspective, in the US market, although profit growth and the loose monetary policy of the Federal Reserve have supported optimistic attitudes towards US stocks, compared to other developed markets, growth in the US has begun to slow down, and Manulife Investment's optimism towards US stocks has decreased compared to the previous quarter.
In developed markets outside of North America, although stocks outside of North America benefit from attractive valuations, controlled inflation, and gradually recovering growth, weak profit prospects, coupled with international and domestic political resistance, have prompted Manulife Investments to adopt a neutral stance.
In the Asia Pacific region, excluding Japan, due to the possibility that some markets may benefit from the recovery of the manufacturing industry and follow the Federal Reserve's loose policy to accelerate interest rate cuts, Manulife Investment has raised the stock prices in the region to a more optimistic attitude, believing that the region presents relatively good investment opportunities.
Diversified investment portfolio is expected to achieve stable returns
For the current bond market, Rick Rieder, Global Fixed Income Chief Investment Officer of BlackRock, pointed out that fixed income investment is not limited to considering interest rate risk, which creates new opportunities for building bond centered investment portfolios, especially with real interest rates showing great appeal in the middle of the yield curve.
At the same time, for bond assets, especially high-yield bonds, both technical and fundamental aspects have shown unprecedented favorable trends. Although the size of the investment grade bond market has significantly expanded, the size of the high-yield bond market has shrunk relative to the broad money supply (M2), reflecting a greater demand than supply for high-yield bonds in the market.
BlackRock believes that the current diversified, globalized, and bond centered investment portfolio is expected to have a potential yield of 6.5%, while volatility is controlled at around 3%. Fixed income investment is no longer limited to traditional duration management strategies, but has shown more diverse investment opportunities and potential.
Schroeder believes that the current bond market environment is completely different from the deflation and zero interest rate era of the 2010s, and bonds no longer have the common advantage of being negatively correlated with the stock market in the past decade. However, the traditional role of bonds as a stable source of income is returning strongly, and Schroeder still tends to include them in asset allocation portfolios. Different fiscal and monetary policies around the world provide numerous investment opportunities for cross market fixed income and money market investments. Meanwhile, strong corporate balance sheets further support the yield performance of the credit market.
Huang Qingfeng, a senior fixed income investment strategist at Lianbo Group, analyzed that the global bond market will still perform very well in 2024, mainly due to the continuous transformation of the overall economic momentum differentiation, and the downward momentum of the economy is slightly slower than market expectations. In addition, the continuous decline in global inflation has prompted central banks around the world to gradually cut interest rates, making the valuation of the global bond market still attractive. Since the beginning of 2024, bond markets in the United States, Europe, emerging markets, and even Asia have all delivered impressive results. Looking ahead to 2025, Lianbo Group believes that the probability of the bond market continuing to rise is still high.
Lianbo further pointed out that investment opportunities in the future bond market will mainly focus on US treasury bond bonds and investment grade corporate bonds. US treasury bond bonds are still indispensable due to their stable performance in market fluctuations. Investment grade corporate bonds, especially BBB rated bonds, have become a sweet spot for investment next year due to their relatively attractive valuations and good fundamentals. In addition, Lianbo is optimistic about diversified bond investment strategies to seize the continuous upward opportunities in the global bond market.
Manulife Investment holds a cautious and optimistic attitude towards the global bond market, preferring leveraged loans over high-yield US bonds because the credit and coupon spread yields of the former are relatively more attractive, providing a better balance between risk and return.
In the Asian market, Manulife Investments prefers high-yield credit over investment grade credit because its valuation is more attractive and credit spreads are better than historical averages. In addition, after years of credit pressure, the default rate may return to normal levels. Manulife Investment remains optimistic about emerging market bonds, believing that if the Federal Reserve cuts interest rates, emerging market currencies are expected to appreciate. However, its credit spread has narrowed and may be lowered in the future.