New report forecasts robust US growth, easing inflation, and opportunities in global markets for 2025
The US economy is positioned for robust growth in 2025, supported by increased productivity and potential policy changes, according to BofA Global Research's newly released outlook.
The report anticipates that US economic and earnings growth will surpass those of other developed economies, with the S&P 500 projected to start strong and end the year at 6666.
The outlook highlights the impact of upcoming US policy changes—spanning tariffs, tax policy, and regulatory measures—which are expected to influence both domestic and international markets.
While European equities may face a temporary slowdown, they are forecasted to rebound by year-end 2025. In China, domestic stimulus measures are predicted to counteract trade policy challenges.
Savita Subramanian, head of US Equity Strategy, foresees over 10 percent growth for the S&P 500 in 2025, with earnings growth accelerating to 13 percent.
Aditya Bhave, senior US economist, estimates US GDP growth at 2.4 percent year-over-year (yoy) in 2025, driven by improved productivity and supportive fiscal policies.
The Federal Reserve is expected to cut interest rates by 25 basis points at its March and June meetings before pausing, as predicted by Bhave and Mark Cabana, head of US Rates Strategy.
Cabana anticipates the US 10-year Treasury yield to remain in a tight range of 4 to 4.5 percent.
Francisco Blanch, head of Commodities and Derivatives Research, projects softening demand for key commodities in 2025.
Oil and grain markets are expected to be oversupplied, while metals markets should remain balanced. Gold prices could peak at $3,000 per ounce after initial headwinds.
Emerging markets are likely to face short-term risks due to US policy uncertainty but may recover as trade policies clarify.
Alex Cohen, senior FX strategist, predicts the US dollar will remain strong through the first half of 2025 before softening amid growth concerns.
Helen Qiao, greater chief China economist and head of Asia Economics, expects China's GDP growth to slow to 4.5 percent yoy in 2025. Domestic demand stimulus is anticipated to offset tariff impacts with a lag.
In Europe, Sebastian Raedler, head of European Equity Strategy, forecasts a 7 percent decline in the Stoxx 600 index by mid-year, followed by recovery to current levels by year-end.
Subramanian expects cyclicals to outperform in 2025, driven by factors such as a Republican sweep, improved productivity, and decades of underinvestment in manufacturing. Demand for credit remains strong, with developed markets anticipated to deliver strong total returns for a third consecutive year.
BofA Global Research emphasises that while policy uncertainty remains a significant factor, positive developments in US equities and productivity growth could provide substantial opportunities for investors in 2025.
