DWS forecasts five more ECB rate cuts until the end of 2025

It took four months for the European Central Bank (ECB) to join the rate hike that the US Federal Reserve (Fed) began in March 2022. Today, however, things have turned around and the biggest Weakness of the US economy in the Eurozone will lead to higher interest rates. The ECB is expected to overtake the Fed on a downward trajectory. DWS plans up to five reductions for the European organization by the end of 2025, placing the level of deposit facility rates at 2%.

For the Fed, they predict three cuts over the next year with which rates will remain at 3.75%-4%. This disparity between the Fed and the ECB is due, in part, to the greater weakness that they see for the economy of the Old Continent, for which they project growth of 0.9% compared to the 2% that they waiting for the United States. DWS bases this lower growth on European dependence on manufacturing, the global industrial recession and supply problems.

However, they believe that Europe will be able to close 2025 by achieving its 2% inflation target. On the other hand, in the United States, the CPI will be 2.4%. From the DWS, they support the resilience of the North American economy through high fiscal spending, high household savings and a strong labor market.

They also explain that the North American market will benefit from Donald Trump’s new mandate, particularly for companies that have hidden in the shadow of the Seven Mercenaries. In this sense, they predict that the profits of Wall Street companies will continue to increase and, although they buy at high prices on the stock market, growth continues to justify the high multiplier. In this way, they expect the earnings per share of the S&P 500 to be around $270 and the PER (times earnings are reflected in the stock price) to be 21.5 times.

In general, They estimate increases of 10% for the world stock marketalthough profits will normalize and they expect 6% growth for the next five years. For Europe, they indicate their preference for small caps, which have favorable valuations combined with diversified advantages and all this represents an ideal entry point into these companies.

In the area of ​​fixed income, they hope that the pack Germany at 10 years closes 20225 with a profitability of 2.2% and the T-Note at 4.5%. They anticipate a good performance from corporate bonds and continue to show their preference for Investment Grade credit in euros.