2025 Alternatives Investment Outlook
Looking back at 2024, it's evident that our investment landscape is constantly changing. What lessons have we learned, and how can we better position ourselves for the opportunities and challenges of 2025?
Changing leadership - Counterpoint March 2025
US tariffs, market fundamentals and geopolitics have caused a change in leadership in 2025: European equities are now outperforming their US counterparts due to improving corporate earnings relative to expectations, more attractive valuations and newly announced government spending, including for defence and infrastructure.
German election – a driver for Eurozone growth?
The “Bundestagswahl” could result in a more growth-focused government led by a new Chancellor – but as it’s unclear how the next Berlin coalition will look like, hopes for meaningful, expansive adjustments could be disappointed.
The European fiscal spending theme gains momentum
Last week, both German chambers, the Bundestag and Bundesrat, approved a constitutional amendment with over two-thirds of the votes. This decision allows for a 10-year defence budget and a 12-year infrastructure funding plan.
Our approach to navigating volatile markets
At the start of 2025, many investors believed that US President Trump’s policies would extend US economic and market exceptionalism. Now, two and a half months later, US equity indices have dropped about 6%, with the dollar being down 4.5%, and Treasury yields have fallen a quarter-percent.
What happened to US exceptionalism?
The idea of US exceptionalism has to do with the outperformance of the US economy and the corporate sector because of stronger fundamentals, an AI-driven innovation boost and supportive policies, as investors have experienced over the past couple of years.
Markets remain focused on geopolitics
At face value, a peace deal should be a positive catalyst for markets, particularly in Europe. So why did markets close on a mixed note last week? Markets traded without a clear direction.
Tariffs and inflation: not a linear relationship
US inflation in January was higher than expected at around 3% for both headline and core inflation (which strips out volatile components). This was mainly due to rising energy prices, along with price increases in used cars, motor insurance, medical care commodities, and airline fares.
Trade tariffs and the AI race keep dominating the market narrative
Last week was dominated by investors digesting the implications of President Trump imposing a 25% tariff on imports from Mexico and Canada, and 10% on China, plus a 25% tariff on steel and aluminium.
How we think about Trump’s trade tariffs
Over the weekend, US President Donald Trump kicked off a ‘trade war’ with its top three trading partners by raising tariffs to 25% on all imports from Mexico and Canada, and 10% on imports from China.
Trump’s first week
Tech stocks, and the broader equity indices, fell sharply on Monday. Progress made by Chinese artificial intelligence start-up DeepSeek has raised concerns about US leadership in the sector.
Trump 2.0, here we go
Tariffs could be enacted as soon as today, with Donald Trump expected to sign executive orders after taking office. We think tariffs are likely to be a negotiating tool rather than a goal.
Entering 2025 with conviction and diversification
Overall, we think markets may have overreacted to the potential impact of tariffs on inflation and, more generally, the consequences of Trump’s impact on the economic outlook.
Our 2025 outlook
New horizons
As we turn the page on 2024, one thing is clear: the world we invest in continues to evolve. The past year defied expectations, surprising us with economic resilience even as markets braced for turbulence. So, what did we learn, and how can we better prepare for what 2025 might bring?
