Expert Insights: Navigating the Shifting Economic Landscape
As the world’s top economists and investors gather at the World Economic Forum in Davos, Switzerland, Guggenheim Partners’ Chief Investment Officer, Anne Walsh, shares her predictions for the U.S. economy in 2025.
A Rate Cut Every Quarter?
Walsh forecasts that the U.S. Federal Reserve will likely reduce interest rates by approximately 75 basis points or even a full percentage point this year, with cuts expected roughly every quarter. This revised outlook comes as trader bets have shifted in recent days, now predicting only one Fed rate cut this year, down from at least three a month ago.
Tariffs: Not as Punishing as Expected
Walsh believes that the tariffs imposed by the incoming administration will not be as severe as anticipated, as long as the dollar remains strong as the reserve currency and the U.S. continues to attract capital. She expects tariffs to rise by less than 10% across the board, with a more country-specific approach.
Bond Market Volatility Creates Opportunities
After a sharp bull run until 2022, the bond market has entered its third year of trading in a range. Walsh notes that this volatility creates interesting opportunities, particularly if the 10-year yield reaches 5%. “That’s extreme, and that’s such an oversold position, it’s a total buying opportunity,” she said.
Stocks Set to Gain from Global Themes
Walsh expects the S&P 500 to deliver returns of 8%-10% by the end of 2025, driven by positive global themes such as artificial intelligence, energy, and the re-shoring of manufacturing to the U.S. However, she acknowledges some uncertainty surrounding the implementation of Trump’s policies and the risk of a slower-than-expected U.S. economy.
A Game of Ping Pong: Politics and Policy
Walsh notes that the interplay between politics and policy will create significant volatility around investing themes this year. “It’s like a game of ping pong… between politics and policy, and that’s going to create a lot of volatility around our themes this year,” she said. As investors navigate this complex landscape, Walsh’s insights offer a valuable guide for making informed investment decisions.
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