Global macro
December 2024
- Tariffs are the main headline for 2025
- Below the surface, however, the outlook appears more optimistic
- When the dust settles there could be attractive opportunities in EM and elsewhere
Pay now, buy later
The year 2025 promises to be an interesting one for the global economy. The Republican clean sweep in the US dramatically increases economic uncertainty, and the likely implication is higher tariffs, lower taxes, stronger measures against immigration and increased deregulation. For most of the rest of the world, tariffs are the main headline and the story is a negative one. The immediate impact of tariffs imposed by the US would be a reduction in world trade and a stronger US dollar. Retaliatory tariffs by the rest of the world might limit dollar strength, but only at the cost of even weaker global trade. These developments are negative for risk assets more generally, and the importance for emerging markets (EM) cannot be overstated. If the USD strengthens and global trade declines, EM currencies will come under pressure.
Below the surface, however, the outlook appears more optimistic. Interest rates rose sharply in recent years, credit conditions tightened and private demand weakened as a result. Now, however, credit conditions are already tight, new lending levels are low and interest rates are starting to come down. Credit conditions are likely to ease, and this will boost demand growth and support a recovery. Fiscal policy in several countries is moving in a more stimulatory direction as well, and even in China policy makers are trying to boost growth. Once the impact of tariffs is taken into account, we expect US growth to exceed trend and global growth to surprise positively. A further decline in global inflation and a lowering of policy rates could add fuel to the rebound.
This is not a clarion call to buy risk assets right now. Trump policy announcements will likely add to volatility in the near term, and the immediate impact on Europe and Asia is likely to be negative. Rate hikes in recent years have provided a solid base for an economic rebound and, when the dust settles, this is likely to provide attractive investment opportunities in EM and elsewhere.
Michael Biggs is Macro Strategist and Investment Manager at GAM Investments.
Important disclosures and information
The information contained herein is given for information purposes only and does not qualify as investment advice. Opinions and assessments contained herein may change and reflect the point of view of GAM in the current economic environment. No liability shall be accepted for the accuracy and completeness of the information contained herein. Past performance is no indicator of current or future trends. The mentioned financial instruments are provided for illustrative purposes only and shall not be considered as a direct offering, investment recommendation or investment advice or an invitation to invest in any GAM product or strategy. Reference to a security is not a recommendation to buy or sell that security. The securities listed were selected from the universe of securities covered by the portfolio managers to assist the reader in better understanding the themes presented. The securities included are not necessarily held by any portfolio nor represent any recommendations by the portfolio managers nor a guarantee that objectives will be realized.
This material contains forward-looking statements relating to the objectives, opportunities, and the future performance of the U.S. market generally. Forward-looking statements may be identified by the use of such words as; “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated,” “potential” and other similar terms. Examples of forward-looking statements include, but are not limited to, estimates with respect to financial condition, results of operations, and success or lack of success of any particular investment strategy. All are subject to various factors, including, but not limited to general and local economic conditions, changing levels of competition within certain industries and markets, changes in interest rates, changes in legislation or regulation, and other economic, competitive, governmental, regulatory and technological factors affecting a portfolio’s operations that could cause actual results to differ materially from projected results. Such statements are forward-looking in nature and involve a number of known and unknown risks, uncertainties and other factors, and accordingly, actual results may differ materially from those reflected or contemplated in such forward-looking statements. Prospective investors are cautioned not to place undue reliance on any forward-looking statements or examples. None of GAM or any of its affiliates or principals nor any other individual or entity assumes any obligation to update any forward-looking statements as a result of new information, subsequent events or any other circumstances. All statements made herein speak only as of the date that they were made.
The information contained herein is given for information purposes only and does not qualify as investment advice. Opinions and assessments contained herein may change and reflect the point of view of GAM in the current economic environment. No liability shall be accepted for the accuracy and completeness of the information contained herein. Past performance is no indicator of current or future trends. The mentioned financial instruments are provided for illustrative purposes only and shall not be considered as a direct offering, investment recommendation or investment advice or an invitation to invest in any GAM product or strategy. Reference to a security is not a recommendation to buy or sell that security. The securities listed were selected from the universe of securities covered by the portfolio managers to assist the reader in better understanding the themes presented. The securities included are not necessarily held by any portfolio nor represent any recommendations by the portfolio managers nor a guarantee that objectives will be realized.
This material contains forward-looking statements relating to the objectives, opportunities, and the future performance of the U.S. market generally. Forward-looking statements may be identified by the use of such words as; “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated,” “potential” and other similar terms. Examples of forward-looking statements include, but are not limited to, estimates with respect to financial condition, results of operations, and success or lack of success of any particular investment strategy. All are subject to various factors, including, but not limited to general and local economic conditions, changing levels of competition within certain industries and markets, changes in interest rates, changes in legislation or regulation, and other economic, competitive, governmental, regulatory and technological factors affecting a portfolio’s operations that could cause actual results to differ materially from projected results. Such statements are forward-looking in nature and involve a number of known and unknown risks, uncertainties and other factors, and accordingly, actual results may differ materially from those reflected or contemplated in such forward-looking statements. Prospective investors are cautioned not to place undue reliance on any forward-looking statements or examples. None of GAM or any of its affiliates or principals nor any other individual or entity assumes any obligation to update any forward-looking statements as a result of new information, subsequent events or any other circumstances. All statements made herein speak only as of the date that they were made.