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Q1 2025

Capital Markets Outlook

February 2025

 

 

 

 

Highlights

Macro
  • The global economy Is likely to slow but with growing divergence; US should slow less than peers.
Rates
  • Global central banks  are moving closer to neutral, but rates are still  “higher for longer” relative to history.
Credit
  • Strong backdrop for Investment-Grade Credit.

  • Technicals and fundamentals remain supportive of High-Yield. 
Emerging-Market Debt (EMD)
  • We see opportunities in EM corporates. 
Equity
  • Global equity market gains were powered by US Large-Caps in 2024. 

  • US stocks: Two reasons to be selective. 
 
  1. Rates
  2. Credit
  3. EMD
  4. Equity

Macro

The Global Economy Is Likely to Slow but with Growing Divergence; US Should Slow Less than Peers

The Coming Trade War Is Likely to Weigh on Non-US Growth in Particular
GDP forecast (percent)

As of December 31, 2024
Source: Bloomberg, IMF and AB

Inflation Should Move Lower; Less So in the US
AB inflation forecasts (percent)

As of December 31, 2024
Source: Bloomberg, IMF and AB

What Are We Watching?
 

Key Upside Risks

  • Renewed business investment after 2024’s elections could boost growth
  • If the trade war proves ephemeral rather than durable it would meaningfully boost sentiment

Key Downside Risks

  • A larger, more persistent trade war could be very disruptive
  • If Middle East conflict spills into energy markets, it could slow disinflation and complicate central bank efforts to support growth

 

Current analysis and forecasts do not guarantee future results.
DM: developed market; EM: emerging market. Growth and inflation forecasts are calendar-year averages, except US GDP, which is forecast as 4Q/4Q.
*International Monetary Fund (IMF) global forecast as of October 22, 2024
As of December 31, 2024
Source: Bloomberg, IMF and AB

© 2025 AllianceBernstein L.P.