Paying dearly for nougat has never stopped anyone at Christmas, and the same goes for the financial markets. Despite historically high valuations, especially in the US, consensus expectations for 2025 are extremely sweet. Some houses predict a growth of the S&P 500 of up to 18%, as if the market could continue to rise without limits.
However, when the stock market trades at 25 times earningshistory reminds us that these prices usually bring mediocre or negative future returns. Surely you remember that famous most expensive nougat in the world which, speaking of markets, leads us to ask ourselves today if the prices are really justified.
‘Premium nougat’ or bubble?
The US economy continues to grow at a rate of 2%, above most developed countries, but close to its limit. Consumption is the main driver, but leading indicators suggest that we could be on the verge of a recession. Meanwhile, Trump’s pro-cyclical policies, such as tariffs and deregulations, generate more uncertainty than confidence.
Recall that in 2018-2019, similar measures led to increased volatility and falls in the markets. In short, like a nougat that falls into pieces before reaching the table.
In the case of Europe and China we could be talking about bitter almond nougat. Europe, although improving, is still like that nougat that promised a lot but arrives a little dry. With the DAX up 21%, expectations are high, but depend on key policy decisions, such as higher fiscal spending in Germany and France. China, for its part, faces structural problems. Despite the stimuli, Consumption remains low and the real estate sector, key to the household wealth effect, is in declinewith prices 80% below their maximums.
These problems could hinder the overall recovery, like a bad cut in a nougat that affects the entire bar.
Artificial Intelligence, the innovative nougat
Without a doubt, Artificial Intelligence is that innovative nougat that surprises us every Christmas and makes us put on a smile (or sometimes a grimace of disgust). In the world of investments, artificial intelligence is the nougat of the moment: something new and promising, but not without doubts.
Examples like Microsoft and its Copilot show that AI has potential, but the question remains how much real benefit it can generate in the short term. As with any trend, it is crucial to separate the truly substantial from the speculative.
Our base scenario includes a recession in the US and Europe, with potential falls of 15% in equity markets. But this does not mean that there are no opportunities. Defensive sectors such as utilities, defense and consumer stable could offer refuge.
In fixed income, significant movements are expected in US 10-year Treasury bonds, with yields falling from 4.4% to the range of 3-3.5%, although in a non-linear way. Liquidity remains high, but households are already at maximum exposure to equities, which limits new flows to the stock markets.
And if at this point we have already had a bit of nougat, let’s not forget that there are other alternatives. Alternative assets such as gold, private equity and the hedge funds They are consolidated as key pieces in portfolios and their weight should not be below 20%.
2025 will not be an easy year, but it will not be devoid of opportunities either. The key will be to diversify and maintain a defensive position, prioritizing sectors and assets that offer stability and protection against volatility.
As with the most expensive nougat, The point is not just to pay the price, but to value the flavor and decide when to enjoy it. In an expensive market, strategy and perspective are the real Christmas gift.
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