Investment convictions
HOME
market stories
MACRO Stories
Macro Stories
Click on the thumbnails to see more information.
Summary
Market Stories
Investment Convictions
© 2024 UniCredit S.p.A. - All Rights reserved
UniCredit
General Company Info
Privacy
Disclaimer
Accessibility
Marketing communication This publication constitutes a marketing communication of UniCredit S.p.A., UniCredit Bank Austria AG, Schoellerbank AG and UniCredit Bank GmbH (hereinafter jointly referred to as the “UniCredit Group”) is addressed to the general public and is provided free of charge for information only. It does not constitute investment recommendation or consultancy activity by the UniCredit Group or, even less, an offer to the public of any kind nor an invitation to buy or sell securities. The information contained herein does not constitute an investment research or financial analysis since, in addition to the lack of content, it has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is not subject to any prohibition on dealing ahead of the dissemination of investment research. UniCredit Group, including all its group companies may have a specific interest in relation to the issuers, financial instruments or transactions detailed herein. Relevant disclosures of interests and positions held by UniCredit Group are available at: https://www.investmentinsights.unicredit.eu/conflictsofinterest-positiondisclosures. Any estimates and/or assessments contained in this publication represent the independent opinion of the UniCredit Group and, like all the information contained therein, are given in good faith on the basis of the data available at the date of publication, taken from reliable sources, but having a purely indicative value and subject to change at any time after publication, on the completeness, correctness and truthfulness of which the UniCredit Group makes no guarantees and assumes no responsibility. Interested parties must therefore carry out their own investment assessments in a completely autonomous and independent manner, relying exclusively on their own considerations of the market conditions and the information available overall, also in line with their risk profile and economic situation. Investment involves risk. Before any transaction in financial instruments please refer to the relevant offering documents. It should also be noted that: 1. Information relating to the past performance of a financial instrument, index or investment service is not indicative of future results. 2. If the investment is denominated in a currency other than the investor’s currency, the value of the investment can fluctuate strongly according to changes in exchange rates and have an undesirable effect on the profitability of the investment. 3. Investments that offer high returns can undergo significant price fluctuations following any downgrading of creditworthiness. In the event of bankruptcy of the issuer, the investor may lose the entire capital. 4. High volatility investments can be subject to sudden and significant decreases in value, being able to generate significant losses at the time of sale up to the entire capital invested. 5. In the presence of extraordinary events, it may be difficult for the investor to sell or liquidate certain investments or obtain reliable information on their value. 6. If the information refers to a specific tax treatment, it should be noted that the tax treatment depends on the individual situation of the customer and may be subject to change in the future. 7. If the information refers to future results, it should be noted that they do not constitute a reliable indicator of these results. 8. Diversification does not guarantee a profit or protect against a loss. The UniCredit Group cannot in any way be held responsible for facts and/or damages that may arise to anyone from the use of this document, including, but not limited to, damages due to losses, lost earnings or unrealised savings. The contents of the publication – including data, news, information, images, graphics, drawings, brands, and domain names – are owned by the UniCredit Group unless otherwise indicated, covered by copyright and by the industrial property law. No license or right of use is granted and therefore it is not allowed to reproduce its contents, in whole or in part, on any medium, copy them, publish them and use them for commercial purposes without prior written authorisation from UniCredit Group unless if purposes of personal use only. Information and data contained in this document is updated as at 15.11.2024.
Head of GIS and Chief Investment Officers in Italy, Germany and Austria
Manuela D’Onofrio
2024 has been a historic election year, with over two billion people casting votes globally. The results have often been surprising, yet democracy has shown remarkable resilience. As we look to 2025, the full impact of electoral shifts will become clearer. Among the most significant developments will be the return of Donald Trump to the White House – a pivotal moment that will undoubtedly shape the global economy. The Compass 2025, prepared by the newly formed Group Investment Strategy team, offers a comprehensive view of our economic forecasts and their main financial implications. Next year geopolitical tensions are expected to intensify, protectionism to rise and industrial policies to become more intrusive. However, this environment will also present significant opportunities for positive changes: Europe, for example, may finally address existential challenges, as it always shifted gears when strictly necessary. In the coming months, major central banks are likely to continue easing rates, albeit at a different pace. In 2025, we may see divergence in monetary policy on the two sides of the Atlantic, on the back of heterogeneous patterns in domestic growth and inflation. Our outlook for 2025 is then marked by cautious optimism: a macro environment characterized by easing monetary policy and positive economic growth will support risk appetite in 2025, as the tightening cycle has replenished central banks’ toolboxes, creating room for bold action in case of need. This is good news for equity and bond returns in 2025, but it will not necessarily translate into an all-clear for global markets. US equities probably show the highest potential for the coming quarters, despite concentration and lifted valuations, but opportunities will also arise in other regions. Bonds will be in demand given their still-attractive carry, with rate cuts being well priced into government and corporate bonds. We hope you find our insights valuable, and we wish you a successful 2025. Manuela and Fabio
In a Nutshell
TOP STORIES
Top 2025 Stories
Deputy Head of Group Investment Strategy and Head of Cross Asset Investment Strategy
Fabio Petti
WHAT WORLD?
What World?
EN
ITALIANO
DEUTSCH
webinarS
Deals & Awards
Product news
Solutions
Home
Contact
QUALE MONDO?
deutsch
Every four years, immediately after the US presidential election, the National Intelligence Council (NIC) publishes its Global Trends report – a bold foresight effort to help the incoming administration envision what the world could look like two decades out. The report’s aim is not to make crystal-ball predictions but rather to identify the key structural forces shaping the future. President-elect Donald Trump will receive the new issue of the report before Inauguration Day on 20 January. The report will look at the world in 2045. In 2008, when Barack Obama became president, the NIC released Global Trends 2025: A Transformed World. As 2024 draws to a close, we think it is worthwhile to reflect on what the NIC predicted two decades ago to gain some insight into what 2025 might hold in store. The key prediction was that “The international system – as constructed following WWII – will be almost unrecognizable by 2025”. The US-led unipolar order was expected to be replaced by a multipolar world – chaotic, unstable and ripe for conflict. The NIC was right in many respects. The Pax Americana is crumbling. New power centers are emerging, military conflicts are on the rise and the world is being divided along geopolitical lines. A second cold war appears to be looming. Mr. Trump’s first term catalysed some of the structural trends the NIC identified almost a decade earlier. He turned his back on the global liberal order, embracing isolationism and protectionism. Ultimately, Trump 1.0 was a presidency of disruption and discontinuity. Trump 2.0 will undoubtedly shape 2025, but this time, Mr. Trump is expected to be a president of continuity. Like it or not, we already live in a Trumpian world, one characterized by rampant protectionism, wide-ranging industrial policies and rising geopolitical tensions. During his second term, Mr. Trump will likely accelerate some of these dynamics through outright transnationalism and unilateralism. However, compared to his first term, he could also be a president of restraint – this is our hope, at least. Today’s world is far more dangerous than in 2016. With two major conflicts underway, in Ukraine and the Middle East, and increasingly strained relations with China, there is less room for miscalculation. Trump 2.0 will probably be a less-inflationary presidency than many fear. Mr. Trump has his sights set on 2026 (midterm elections) rather than on 2028 (presidential elections). If he adopts policies that are too inflationary, he will likely pay the price in 2026 by losing Congress. After making some symbolic decisions related to targeted tariffs, immigration and taxes in the first months of his presidency, to follow through on campaign promises, he is likely to try and shift attention away from economic promises and towards identity issues. Given the uncertainty and risk associated with Mr. Trump’s economic agenda, the Fed will likely be more cautious than it would have been if Kamala Harris had won. It will likely use the first half of next year to cut rates towards 4%, when there will not yet be any visible impact from Mr. Trump's policies. Although the ECB and the BoE will likely continue towards neutral territory, a less-dovish Fed might make them more hesitant. Like central banks, the rest of the world will have to adapt to the shifts and shocks triggered by Mr. Trump’s return to the White House. The EU will face a critical choice in 2025: whether to step up and become a true geopolitical superpower, with a cohesive industrial and defense strategy, or to continue drifting in a world of rival blocs and a less-engaged US. In 2008, the NIC regarded the latter scenario as more likely. The other big challenge for Europe will be to stick to its climate change commitments despite a probable setback on this front by the incoming Trump administration. Similarly, China will have to decide whether to upgrade its growth model away from exports and investment and towards private consumption. With Mr. Trump in the White House, the world will be even less willing to absorb China’s overcapacity, particularly regarding electric vehicles, solar panels and batteries, and this could lead to an intensification of current trade tensions. The 2008 NIC report barely mentioned artificial intelligence (AI). Back then, AI was still a nascent technology. In 2025, AI will continue to shape the direction of stock markets, possibly leading to market stress due to the high concentration of tech stocks. Given the centrality of chips to the development of AI, Mr. Trump’s ambiguous attitude towards defending Taiwan’s status could be another source of volatility for tech stocks. In its 2008 report, the NIC missed the shale-oil revolution in the US, which was to reshape the oil market around five years later. The report claimed that, by 2025, the world would enter a post-oil economy – as supply was not expected to keep up with demand. In reality, and despite rising demand, the oil market is dealing with oversupply, which could be exacerbated by Mr. Trump’s support for the US oil industry. However, a global shift towards electrification is making the global economy less-oil-intensive and relatively more metal-intensive. If trade tensions escalate between the US and China (which controls a large supply of key metals), we might see a new type of energy shock in 2025 – one centered around metals rather than oil. What the NIC did not predict in 2008 was the erosion of American democracy. This is a trend that will likely last beyond 2025.
Welcome to Trump 2.0
Chief Editor of The Compass 2025
Edoardo Campanella
Top Stories
Download PDF VERSION
View Charts
The outcome of the US presidential election has added to already high geopolitical uncertainty. Fresh tariffs are likely to increase tensions between the US and China and weigh on global manufacturing as they dampen trade, affect sentiment and cloud the outlook for capex. We expect global GDP growth to stabilise at just above 3% over the next two years, with risks mainly skewed to the downside.
View Chart
With President-elected Donald Trump in the White House, the US outlook will be shaped by the implementation of his pledges, notably higher tariffs, looser fiscal policy and tighter immigration. Amid high uncertainty, we expect slightly-above-trend GDP growth over the next two years, with inflation likely to remain above target.
Trade tensions are likely to challenge China’s export outlook and expose the weakness of its domestic demand. We expect deceleration in economic activity to continue in 2025 and 2026. Bold consumption-boosting measures will be needed to lift depressed consumer confidence, but these are unlikely to happen anytime soon.
The Eurozone is likely to remain trapped in a low-growth environment next year, continuing to meaningfully underperform the US in terms of economic activity. While external trade and fiscal policy are likely to drag on economic growth, monetary-policy normalisation and household spending are expected to support activity. In 2026, an economic recovery is likely to gain some traction.
Growth in EU-CEE countries is likely to accelerate. Monetary easing and higher EU fund flows will support domestic demand, while fiscal tightening and weak external demand will drag down economic activity. Inflation will likely converge into target ranges by the end of 2026.
GLOBAL
US
CHINA
EUROZONE
EU-CEE
Click on each story for more information.
Source: Bloomberg, UniCredit Group Investment Strategy
MONETARY POLICY RATE EXPECTED IN THE NEXT 12 MONTHS
Source: XXXXXXX
GOVERNMENT BONDS CHART 2
Source: Bloomberg, UniCredit Group Investment Strategy Observation period: Feb 2013-Feb 2024
TARIFFS LEAD TO TRADE DIVERSION China’s soybean imports (mn/tons, 12M cumulated)
Source: NBS, UniCredit Group Investment Strategy Observation period: Jul 1992-Jul 2024
CHINESE CONSUMERS ARE PESSIMISTIC
Source: Eurostat, UniCredit Group Investment Strategy Observation period: 1999-2026
A WIDE GROWTH GAP BETWEEN THE US AND THE EUROZONE Annual GDP GROWTH, %
Source: Eurostat, UniCredit Group Investment Strategy Observation period: 2023
THE US IS THE EUROZONE’S MAIN EXPORT MARKET % of extra-eurozone exports, goods
Source: XXXXXXXX
FX CHART 1
Source: XXXXXX
FX CHART 2
MONETARY POLICY
Monetary easing by major central banks has further to go, although the pace and extent of rate cuts will reflect heterogeneous prospects for domestic growth and inflation. On balance, the outcome of the US election has reduced scope for Fed easing while increasing pressure on the central banks of countries with large manufacturing sectors to loosen monetary policy more aggressively.
Source: Bloomberg, UniCredit Group Investment Strategy Observation period: Dec 2022-Dec 2026
MONETARY EASING TO CONTINUE IN MOST JURISDICTIONS POLICY RATES, %
Click on the cross to close the charts.
Click on the cross to close the charts view.
Click on the cross to close the chart.
Source: Bloomberg, UniCredit Group Investment Strategy; observation period: Feb 2013-Feb 2024
TARIFFS LEAD TO TRADE DIVERSION China's soybean imports (mn/tons, 12M cumulated)
Source: NBS, UniCredit Group Investment Strategy; observation period: Jul 1992-Jul 2024
Source: Eurostat, UniCredit Group Investment Strategy; observation period: 1999-2026
Source: Eurostat, UniCredit Group Investment Strategy; observation period: 2023
Source: PIIE, UniCredit Group Investment Strategy Observation period: 2018-2023
FRESH TARIFFS ARE IN THE PIPELINE US-China tariff rates toward each other and rest of world, %
download the full report
OVERSUPPLIED OIL MARKET MB/D
Source: International Energy Agency, UniCredit Group Investment Strategy Quarterly data from 1Q21 to 4Q25
Source: Bloomberg, UniCredit Group Investment Strategy Daily data from 4-Jan-06 to 15-Nov-24
THE SHINING PERFORMANCE OF GOLD THIS YEAR
10Y UST and EGB yields are likely to trade sideways, since rate cuts are already priced in and due to heavy bond supply expected next year. Government bonds are expected to deliver a positive performance, mostly in light of carry. Across eurozone govies, we prefer BTPs to OATs, which remain sensitive to political developments in France.
Government Bonds
Corporate bonds are in a good position, underpinned by a favorable economic outlook and sound cash management. Bank bonds are also set to perform well and we see some opportunities across lower-rated companies. ESG bonds are appealing as they no longer trade at a premium than conventional bonds.
Stocks
We expect stocks to experience another year of solid returns, as a positive economic outlook will support earnings growth. US stocks are set to outperform given the brighter economic outlook and Trump’s agenda (deregulation and corporate tax). Stretched valuations and market concentration are not a concern. We prefer defensive sectors for now, while cyclical sectors could emerge on a second stage.
Commodities
FX
The outlook for commodities is mixed. We expect oil and gas to remain at around current prices in our baseline scenario. A further escalation of geopolitical tensions would likely affect supply, leading to an increase in their prices. The upside potential for gold is limited, given its stellar performance this year, while industrial metals could rebound thanks to recovering demand.
In FX, Trump’s agenda is set to favor a further appreciation of the USD against the EUR and GBP, which are affected by a softer economic growth. A tighter monetary policy of the BoJ could favour a moderate JPY recovery. From a longer-term perspective, neither the attempt of the BRICS+ group to find an alternative to the greenback nor technological innovations are likely to undermine the USD dominance in the international monetary system.
CORPORATE Bonds
Source: Bloomberg, UniCredit Group Investment Strategy Weekly data from 15-Nov-19 to 15-Nov-24.
POLICY RATES AND THEIR IMPACT ON LONGER-DATED YIELDS
Source: Bloomberg, UniCredit Group Investment Strategy Weekly data from 20-Nov-04 to 15-Nov-24.
BTP OUTPERFORMANCE VS. OATS 10Y BTP-OAT SPREAD
Source: S&P Global, UniCredit Group Investment Strategy Monthly data from Dec-04 to Sep-24
RECOVERING CREDIT CYCLE TO SUPPORT EUROZONE CREDIT
Source: Bloomberg, UniCredit Group Investment Strategy Yearly data from 2020 to 2024
ESG bonds outstanding worldwide
Source: Bloomberg, UniCredit Group Investment Strategy Daily data from 1-Jan-18 to 15-Nov-24
US VALUATIONS ARE STRETCHED BUT NOT EXCESSIVE P/E RATIO
Source: Bloomberg, UniCredit Group Investment Strategy Daily data from 1-Jan-19 to 15-Nov-24
STRONG US EARNINGS GROWTH TO CONTINUE 12M forward eps estimate
A WIDE UST-BUND SPREAD IS LIKELY TO KEEP EUR-USD SUBDUED
*Sum of FX is 200%. Source: Bloomberg, Bank for International Settlements, IMF, SWIFT and UniCredit Group Investment Strategy Observation period: 2023-2024
THE USD HAS NO RIVALS AT PRESENT
No, we see AI as neither a bubble nor a short-term hype. AI is here to stay. AI is a transformative technology with wide ranging applications and the ability to increasingly accelerate revenue streams for companies active in AI, primarily increasing the efficiency of existing work processes and making businesses more efficient and profitable, leading to additional company earnings momentum for the wider stock market over the next decade. AI company earnings growth is excellent: The five largest AI related US companies showed earnings increase of 375% since 2018 (compared to only 80% for the S&P 500), while estimates are for a further 45% increase over the next 12 months. Given the centrality of semiconductors in the development of AI, Trump’s ambiguous attitudes towards defending Taiwan’s status could be a source of volatility for tech stocks – as was the case last summer when he downplayed the strategic importance of the island by saying: “Taiwan is 9,500 miles away (from the US). It's 68 miles away from China.”
Is AI a bubble?
Source: Bloomberg, UniCredit Group Investment Strategy Observation period: 1 Jan 2019-15 Nov 2024
AI large-cap index is well supported by underlying earnings growth
FISCAL POLICY
AUTO INDUSTRY
AI
Driven by massive technological change, the global auto industry is currently undergoing its most profound transformation ever. Chinese car manufacturers have taken the lead, especially with electric vehicles, while legacy automakers in Europe have been losing ground. We expect the European car industry to sputter on in 2025-26, given that it faces substantial structural challenges, such as the need to reduce production costs and having to catch up with regard to software and connectivity. However, there will also be glimmers of hope, as the negative impact of possibly higher US tariffs will be dampened by the fact that many German auto manufacturers are located in the US and can produce and sell their products directly there. Beyond 2025-26, our long-term outlook for European car manufacturers is constructive, as the technological race in the global auto market is not over but has just started. New massive technological change, such as the rapid evolution of battery technology and the rise of autonomous vehicles, is still to come, which will decide the winners and losers.
Auto Industry
Source: BNEF, Bundesbank, UniCredit Group Investment Strategy
Chinese car producers in the passing lane Global passenger EV sales (in mn), by market/region of automaker headquarter
Trump’s electoral promise of additional fiscal stimulus risks accentuating the US’s fiscal policy divergence relative to the eurozone seen over the past years, pushing the US debt/GDP ratio up further from current record-high levels. This is more likely as new fiscal rules will limit the eurozone’s room for maneuver, as highly indebted countries will have to pursue restrictive fiscal policies over the next decade. Trump’s return to office next year may prompt eurozone members to rethink their spending, especially on defense, but this may not be a silver bullet to resolve the massive investment needs they are facing. This contrasting fiscal stance is also likely to increase the near-term divergence of the real neutral interest rate, or r-star, between the US and the eurozone, with implications for the federal funds rate and rate differentials. The Fed will proceed more cautiously with rate cuts, without risking endangering economic growth with an excessively restrictive stance (especially if inflation expectations move upwards). For markets, high US deficits will create the risk of term-premium repricing, which would result in a steeper curve. In addition, we see risks of volatility bouts in the US relative to the eurozone.
Much looser Fiscal Policy in the US vs. the eurozone – Why it could matter for markets
Note: CBO public debt figures refer only to gross federal debt held by the public, excluding debt held by federal trust funds and other government accounts. Source: Congressional Budget Office, Eurostat, UniCredit Group Investment Strategy Observation period: 1999-2026
US PUBLIC DEBT IS AT RECORD-HIGH LEVELS Public debt (% of GDP)
Our prevailing outlook for 2025 is cautious optimism. A good deal of caution seems to be warranted, as various elements are making the market outlook less certain. The economic cycle encourages us to remain selective and prudent in our investments, following strategies that can enhance portfolio resilience. We are also prepared to take advantage of selected opportunities that arise when market volatility leads to valuations that exceed or fall short of fundamentals. As the macroeconomic backdrop is expected to remain positive for risky assets over the coming quarters, we reiterate our constructive view for global equities. While we see bond returns as being mostly driven by carry, reduced inflationary risks and the prospect of more rate cuts should be supportive factors.
View Table
Click on the cross to close the table.
1 Developed Markets (Australia, Japan, Hong Kong, New Zealand, Singapore)
asset allocation Our investment view on asset classes
