MYworldfix

In preparation for the challenges and opportunities of 2025, Neuberger Berman's investment leaders have identified five pivotal themes that will influence global markets. These themes encompass economic growth, inflation management, equity market performance, bond market dynamics, and corporate activity. The analysis suggests a year of above-trend growth, driven by supportive policies and industrial strategies. Additionally, the focus on real income growth is expected to stabilize economies, while deregulation and business-friendly policies could lead to broader earnings growth. Bond investors may shift their attention from monetary to fiscal policy, and a surge in mergers and acquisitions is anticipated due to various converging factors.

Economic Growth and Inflation Management

The coming year is poised to witness an acceleration in economic activities, with potential for above-trend GDP growth in the United States and other global economies. This outlook hinges on the containment of inflation and the effective implementation of industrial policies aimed at influencing domestic production patterns. Governments are likely to employ a combination of spending, fiscal measures, trade policies, and deregulation to achieve these goals. If successful, this approach could mitigate concerns over debt and deficits, ensuring a manageable economic environment.

Moreover, achieving moderate inflation and fostering real wage and income growth will be critical for stabilizing political landscapes and boosting consumer confidence. Countries that can balance these elements effectively are expected to see improvements in GDP growth rates and political approval ratings. Evidence suggests that policymakers, particularly in the U.S., recognize the importance of these objectives, and similar trends are emerging in other regions. The success of such policies will be reflected in economic data and could set the stage for sustained growth throughout 2025.

Market Dynamics and Corporate Activity

The performance of equity and bond markets is expected to evolve significantly in 2025. Business-friendly policies, moderate inflation, and lower interest rates could drive broader earnings growth across various sectors. While large technology companies may experience slower growth as capital expenditures increase, value stocks, small-cap stocks, and sectors like financials and industrials are poised to gain ground. Non-U.S. markets could also perform more strongly due to higher global growth and lower commodity prices. This shift in market dynamics will be influenced by relative valuations and fundamentals.

In the bond market, the focus is likely to transition from central bank responses to fiscal policy. Investors may pay closer attention to growth prospects and the implications of deficits. By the end of 2025 and into 2026, bond market volatility could migrate from the short end of the curve to intermediate and long ends, leading to a moderate steepening of yield curves. Additionally, the corporate sector is expected to see a boom in mergers and acquisitions, fueled by optimistic valuations, stable inflation outlooks, declining interest rates, and tighter credit spreads. Regulatory shifts in the U.S. could further facilitate this trend, benefiting secondary private equity markets and event-driven hedge fund strategies.