Schroders Investment 2025 Top Ten Investment Outlook Favoring the US Dollar and US Stocks

According to the Zhitong Finance APP, recently, Schroders Investment published its top ten investment outlook for 2025. These ten investments by category include: in stocks, a positive outlook on the overall U.S. stock market (S&P 500 equal-weight index), emerging markets/Asian stocks; in bonds, Schroders favors European government bonds, emerging market local currency bonds, 2-year and 10-year U.S. Treasury bonds; additionally, they are optimistic about gold, the U.S. dollar, Asian credit, and private market assets, but hold a pessimistic view on crude oil.

Keiko Kondo from Schroders Investment stated that with a strong performance expected in the second half of 2024, the outlook for U.S. economic growth appears optimistic, especially in terms of consumption and the labor market. Although concerns about U.S. consumer confidence had previously raised doubts about the local economy, recent data has alleviated these worries. The total savings of U.S. consumers still amount to nearly $20 trillion, and strong employment data is expected to continue supporting consumer spending. Even though inflation remains controlled and the market has digested a more aggressive monetary policy stance, there is still uncertainty regarding the timing and extent of the Federal Reserve's interest rate cuts. Nevertheless, as the U.S. yield curve normalizes and enters a policy easing cycle, the global stock market outlook remains optimistic.

She noted that the overall U.S. inflation rate has fallen below 3% and is considered to be experiencing an economic "soft landing," thus favoring the overall U.S. stock market. While economic and profit growth in Europe is slowing, the opposite is true in emerging markets and Asia, providing attractive entry opportunities for these two regions.

Regarding Europe, Keiko Kondo believes that the European Central Bank has become "data-dependent" after three interest rate cuts this year. With the arrival of 2025, it is expected that the Eurozone will continue to lower interest rates while keeping inflation expectations under control to address weak economic growth.

She also favors European government bonds, Asian credit, and emerging market local currency bonds. European government bonds are expected to benefit during the interest rate cut cycle, and the diversification role of this asset class makes it attractive.

In Asia, strong economic growth, particularly in China, India, and Indonesia, may drive the performance of Asian credit, with expected credit spreads being more attractive than those of U.S. and European bonds. Additionally, many emerging market local currency bonds offer highly attractive yields, which are expected to bring considerable returns in 2025.

In recent years, private market assets have gained increasing attention among global and Asian investors, and Keiko Kondo supports this trend. She pointed out the benefits of including such assets in a diversified investment portfolio, one of which is their low correlation with other asset classes. Furthermore, the credit spreads of private equity (PE) are higher than those of non-investment grade bonds