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2025: The year ahead. Maybe?

Our head of multi-asset investments, David Coombs, makes a bad Nostradamus. Lucky he’s a fund manager! Here are his predictions for markets in the year ahead. Spoiler alert: he’s usually wrong. But it’s all about the direction of travel…

By David Coombs 8 January 2025

Zager and Evans famously (well, famously for a certain vintage) sang, “In the year 2525, if man is still alive.”  Well, it’s not 2525 but 2025 seems close enough: 2024 was a year of horrendous conflicts and high levels of geopolitical risk. Well, man (and woman) is hanging on, but what does the new year bring?

As is now the annual ritual, I list below my top 10 predictions for 2025. As usual, they should be taken with a healthy pinch of salt (along with any other predictions you may hear from others!):

  1. The war in Ukraine ends. Gas and oil prices fall as Russia is promised readmittance to international energy markets as part of the peace deal. Agricultural commodity prices fall as well, as the wheat and grain powerhouses put down their weapons and focus on cultivation, adding to deflationary forces.
  2. UK GDP will shrink over the year. Tax revenues will miss targets causing Chancellor Rachel Reeves to raise more taxes, stating no more tax rises until the next Parliament…unless she needs to earlier.
  3. UK government bond yields will be volatile – moving lower due to zero GDP growth and interest rate cuts from the Bank of England, yet bouncing higher due to lower tax revenues and concerns about public finances. A traders’ market. The 10-year yield hits 3.5% at the end of the year or at least by the time of The Sharpe End  Christmas Special.
  4. US equities outperform Europe’s yet again (in similar vein to Glenn McGrath’s routine 5-0 to the Aussies Ashes predictions) as European growth stagnates and France has two more prime ministers by June. More positively, Andorra beats England in the June Football World Cup qualifier, bringing a smile to European Commission President Ursula von der Leyen’s face.
  5. Gold falls to $2,000 as US interest rates stay above 4%. China stops buying gold and starts quantitative easing to support its lacklustre economy.
  6. “First Buddy” Elon Musk falls out with US President Donald Trump; however, DOGE (the Department for Government Efficiency) still saves $500 billion from the annual federal budget, pushing US Treasury yields lower.
  7. ‘Value’ stocks outperform ‘growth’…only kidding. Adding to some of our existing holdings that have been unfairly beaten up because of their Chinese businesses is probably the closest thing to a value trade that we feel is worth making.
  8. Lender NatWest relists in New York. OK that maybe going too far, but expect at least one more FTSE 100 company to announce a move to the US in 2025.
  9. Guinness launches a yellow slushy as it goes after the ‘yoof’ drinker, another victim of “go woke, go broke”. I jest of course, but I think this year we will see a more serious move back into companies that can walk the walk in terms of sustainability, despite Trump. 
  10. I will score more than 3.75 (my score for 2024)  for my predictions. My last one’s a banker: UK Prime Minister Keir Starmer is replaced by his deputy Angela Rayner by Christmas.

Tune in to The Sharpe End - a multi-asset investing podcast from Rathbones. You can listen here or whenever you get your podcasts. New episodes monthly.

 

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