At Allianz Global Investors, one of the world’s leading asset managers, forecasts a soft landing in the United States, while warning of two scenarios that could put them at risk: a further acceleration of inflation and a recession in the country. In a context where they expect inflation to move closer to the target set by central banks (even if underlying inflation remains high), they maintain positive outlook on the bond market, goes hand in hand with planned interest rate cuts.
These are some of the conclusions outlined by Stefan Hofrichter, director of global economics and strategy at Allianz Global Investors, in presenting the macroeconomic and market outlook for 2025. With a focus on the recent US elections, The expert indicated that the result of these elections could have a lasting long-term impact on the financial markets and underlines the “populism” as “a long-term brake on growth and the behavior of financial markets”“.
After Trump’s return to the White House, Allianz GI believes that risks to bond yields are on the rise in the short term. “Yet with trend nominal growth of 4% in the United States and assuming neutral long-term monetary policy, the long-term equilibrium return on the U.S. dollar is around 4%. “Normalization of the yield curve is only just beginning.”
Given the slightly different growth dynamics in the Eurozone compared to the US and the ECB’s rates at reasonable prices, the company expects increase the yield spread of US bonds relative to Eurozone bonds.
In this sense, Hofrichter pointed out that after a populist government comes to power, real GDP growth tends to be significantly lower compared to a country’s own history, as well as the average global in the long term. The reasons, according to the expert, are that economies are becoming less open, suffering from higher inflation, higher debt levels and fewer freedom rights. “However, the growth disadvantage usually only begins after about two years, as populists are slow to change economic policies and implement fiscal stimulus measures during the first years of their power,” he says. he.
Regarding its variable revenue forecasts, from Allianz They favor the values of growth and quality and we maintain the values of IT over the long term, and they believe that until cyclical data indicates a significant slowdown and inflation accelerates significantly again, The American stock market is expected to continue its rise. “After the US elections, even a thaw is possible. However, long-term downside risks are increasing given the high valuations of US stocks and high expectations for long-term earnings growth.”
“Although IT stocks are not cheap, with the exception of some Magnificent Seven names, valuations are not excessive. We add IT stocks in times of weakness rather than reducing them in times of strength and we we focus on reasonably priced stocks and subsectors with good growth potential,” the expert explained.
“Growth stocks could benefit from rate cut expectations and weaker growth dynamics. “Quality stocks will likely hold up if volatility increases due to growth fears or political uncertainty,” he added.
