The climate that reigns in the financial market in the last steps of 2024 will not end with the last bell on December 31. The investment bank Bank of America (BofA) discounts that 2025 will bring greater market volatility due to global uncertainty and as a result of the electoral result in the United States and the victory of Donald Trump. And, although the US economy will continue to show its strength, US trade policy will condition growth in the coming months.
BofA’s chief economist for Europe, Rubén Segura-Cayuela, anticipates that the United States economy will continue to lead the growth of developed economies in 2025. “The US economy starts from an extremely resilient situation“commented Segura-Cayuela, who added that the doubts will come from how Trump implements his tariff policies.
With macroeconomic indicators that will show a strong economy next year driven by more lax taxation, inflation could be higher than expected by the US Federal Reserve in 2025. “Inflation could stagnate above the Fed’s target levels at 2% beyond 2026, which will force monetary policy to be recalibrated with fewer cuts,” commented the head of Bank of America. The investment bank estimates that there would only be three more rate cuts that would leave the reference rate at around 3.5% to 4%.
This environment will keep the dollar in a dominant position against other currencies such as the euro, which could fall until it is seen a cross between both currencies at 1.03 dollars to the exchange rate before stabilizing at 1.1 dollars.
Likewise, Wall Street indices would find in this scenario the possibility of setting new historical highs. “The US stock market should continue to be strong with volatility until doubts regarding upcoming US tariff policies are resolved,” commented BofA. The pressures from the investment bank place the S&P 500 at 6,666 points at the end of 2025 which would imply an upside potential of 10% from current levels.
The situation of the European economy differs from the American case. The investment bank considers that the Countries in the center of the eurozone will remain in a weak situation higher than that of the peripheral countries in the coming months, mainly in the case of Germany and France. Therefore, they consider that the Stoxx 600 could face falls of up to 9% in the next year.
From the investment bank they feel more predisposed towards the defensive values of the European stock market such as sectors focused on food or pharmaceuticals. Similarly, from Bank of America they discount that cyclical companies, those that perform best when the economy is in an expansionary phase, will be the ones to lose in 2025. BofA also underweight the airline, insurance and banking sectorsin which they foresee falls and that will take their toll on indices such as the Ibex 35, with a high weighting in financial companies.
However, and despite the fact that several stock indices on both sides of the Atlantic are trading at highs of the year and even historical highs, you cannot talk about a financial bubbleaccording to the firm. “There are years left before finding a point of great adjustment in the markets,” commented Francisco Blanch, head of commodity and derivatives strategies at Bank of America.
#Bank #America #anticipates #greater #volatility #Wall #Street #travel #European #stock #market
