The arrival of Donald Trump to the White House has forced the investment strategies and forecasts of experts to be redesigned for 2025. And with the Wall Street stock market at all-time highsvaluations can discourage some from taking positions. Diaphanum believes that the financial market will present a new opportunity next year. However, it may not be as good as the current year for either fixed income or equities.
The Republican victory in the United States and the looming tariff war will put inflation as the main disruptive element for the markets next year, according to the advisory firm Diaphanum SV. From his point of view, the market still expects central banks pursue their goal of reaching 2% inflation, although there may not be as many rate cuts as the market discounted before Trump’s victory.
“We continue in a world with geopolitical risk. We believe that there will be growth, but less than expected in recent years“commented Diaphanum’s investment director, Miguel Ángel García. The firm considers that the US economy will be boosted by the policies of the Republican president, while for the eurozone they set a growth of 1% for next year.
In this environment, they consider that the expansion of the profits of listed companies will give more scope to equities in 2025. And, as central banks will go in search of their neutral rates next year, the profitability of bonds will also will tend to be trimmed. “All the market is positioned for a rate cut. How much it is, right now, is the least important,” explained the firm’s investment director.
“As long as the profitability of bonds does not become competition for equities and they meet the benefits that the market projects for 2025, this will be a good year. But it may not be as good as what we have seen in 2024,” García commented, after seeing indices such as the S&P 500, which has advanced more than 25% so far this year and with the debt market with a lot of volatility that allows profit from bond price movement.
The main expansion of profits in equities in developed economies will continue to focus on the United States. At this point, Diaphanum considers that the ratings are high in certain Wall Street indices, although part of the fact that they can pay dearly comes from large capitals such as those included in The Magnificent Seven. “We believe that these valuations are justified by the profit expansion that will come next year, but it could be a problem if it does not meet market expectations later,” they added from Diaphanum.
For this reason, Diaphanum points out that risk can be reduced in equities with these valuations, while indicating that sectors such as technology, biotechnology or health can offer good returns for next year. Likewise, the fiscal policies that the new Trump Administration will apply will lower taxes on national companies and impose tariffs on imports. “This plays in favor of small and medium capitalized companies that have been very mistreated and now have ratings that are not very excessively high. The tariffs are going to take away powers from these companies,” said the investment director of the advisory firm.
On the debt market side, they will maintain a low duration strategy while reducing credit risk and opting more for sovereign bonds. At this point, they opt more for European peripheral bonds such as Spanish or Italian titles. Regarding alternative values, Diaphanum will continue to monitor gold while predicting that the dollar will lose strength against the euro in the medium term.
#García #Diaphanum #good #stock #market #bonds #good
