More opportunities than risks in the new stock market year

Trump and the USA

US President Donald Trump's second term in office is likely to lead to far-reaching changes in US economic policy. While his plans for deregulation and tax cuts could provide short-term growth stimulus, tariffs, inflation risks and geopolitical tensions are generally weighing on longer-term stability. In this case, sectors such as industry, raw materials and the automotive industry would be particularly affected. So the question is: will the USA remain as strong as it has been recently and China and Europe will remain comparatively weak or will the trend reverse? While the USA remains a leader in the technology and consumer sectors, possible trade conflicts are looming. US stock markets are expensive, which increases the risk of corrections. China has high growth potential in the areas of technology and renewable energy. However, structural weaknesses and trade conflicts dampen development opportunities. In Europe, however, political uncertainties and export risks dominate. In Germany we also see political and economic uncertainty, at least until the new elections at the end of February and the formation of a hopefully stable federal government. At the same time, the elections offer significant opportunities for economic reforms, political stability and the strengthening of the EU, which should act in a united manner, especially against the Trump administration.

What happens to the interest?

The interest rate reduction path is priced in, but skepticism remains: The markets currently only expect interest rate cuts by the US Federal Reserve from the second half of 2025, as inflation remains above the target despite moderate declines. A continued robust labor market could also reduce the need for rapid rate cuts. And the inflation rate could even rise again if the US government implemented the threatened tariffs on its most important trading partners. In the Eurozone we see inflation continuing to fall, due to economic weakness, falling energy prices and fewer supply chain problems. The ECB is expected to make three to four interest rate cuts in 2025 to support growth and encourage lending.

Positive trend intact

In 2025, too, it is important not to allow yourself to be misled by polarizing narratives or short-term political statements. In US stocks, we see the positive trend intact, supported by the robust economy, strong corporate profits and further investments in artificial intelligence (AI). We therefore remain overweight US stocks in our asset mandates. For European stocks, lower valuation metrics compared to the USA offer catch-up potential, but in our view this requires the economy to stabilize first. Due to political tensions such as trade conflicts, we are preparing for increased market volatility in the coming months. In order to actively manage these, we continue to rely on a diversified allocation in accordance with our balanced multi-asset approach and, if necessary, take hedging measures in order to increase the invested assets and preserve them in the long term.