The Robeco 2025 Outlook paints a nuanced picture of the global economy and markets, challenging traditional narratives about the current cycle. Echoing René Magritte’s “The Treachery of Images,” the report highlights that while surface-level indicators suggest an economic landing, the reality is far more complex. The central thesis is that the global economy is not experiencing a true landing, but rather navigating a turbulent transition shaped by geopolitical shifts, policy realignments, and structural transformations.
Key Themes and Scenarios
1. Three Scenarios for 2025
- Base Case: “This is Not a Landing”
- Economic resilience despite surface-level weakness; inflation risks rise due to procyclical fiscal and monetary policy.
- Key risks: Excessive easing could bring forward inflationary pressures, especially in the U.S. due to tight labor markets and elevated growth rates.
- U.S. GDP growth forecast: 1.7%, slightly below consensus, with inflation at 2.75%.
- Bull Case: “A Surreal Ascent”
- Synchronization of global monetary easing and further disinflation fuels a “golden age.”
- U.S. consumption remains strong, driven by productivity gains and well-supplied energy markets.
- Key catalysts: AI infrastructure, chips industry growth, and geopolitical detente.
- Bear Case: “Waking up from a Pipe Dream”
- Trade wars and geopolitical tensions trigger stagflation, escalating inflation and unemployment.
- Eurozone faces deteriorating consumption due to tariff threats; China struggles with youth unemployment and domestic unrest.
2. Financial Markets Outlook
- Equities:
- U.S. markets remain resilient, but elevated valuations limit upside; forecasted mid-single-digit returns for the S&P 500.
- Opportunities in small-cap and value stocks, benefiting from tariffs and domestic consumption.
- Europe sees potential for multiple expansion due to lower discount rates and positive earnings surprises.
- Fixed Income:
- Investment-grade credit attractive due to tight spreads and supportive monetary policy.
- High-yield bonds offer limited upside as spreads remain compressed, increasing risk of spread widening.
- U.S. 10-year yields forecasted to peak between 4.5%-5%, reflecting nominal growth above 4%.
- Currencies:
- USD remains overvalued but strong amid geopolitical tensions; expected to peak if Fed cuts rates further.
- JPY undervalued, with potential to strengthen on both domestic (rate hikes) and global (safe haven demand) fronts.
3. Sustainable Investing: Transitioning to Long-Term Opportunities
- Transition Investing:
- Rapid growth in funds focused on transitioning to low-carbon economies and broader sustainability themes.
- EU leads in implementing robust ESG reporting and transitioning to climate-resilient economies.
- Climate and Nature Action:
- COP 30 to address new climate commitments and financial mobilization for adaptation and resilience.
- Increased focus on biodiversity and nature-related investments through initiatives like Nature Action 100.
- Green Bonds:
- Record issuance of USD 942 billion in 2024; diversification into emerging markets and hard-to-abate sectors expected in 2025.
- Pricing remains attractive as the greenium (green bond premium) declines.
Key Risks and Opportunities
- Geopolitical Risks:
- Trade wars, particularly between the U.S. and China, could disrupt global supply chains and amplify inflationary pressures.
- Tensions over Taiwan and hybrid conflicts exacerbate uncertainties.
- U.S. Policy Shifts:
- Procyclical fiscal and monetary expansion under the Trump administration may spur short-term growth but risk stagflation in the medium term.
- Global Transition Themes:
- Continued investment in AI, renewable energy, and decarbonization presents compelling long-term opportunities.
Robeco’s 2025 Outlook underscores a world in transition, where short-term uncertainties obscure long-term growth potential. Active management, flexible investment strategies, and a focus on structural themes like sustainability, digital transformation, and economic resilience are critical for navigating the year ahead. By aligning portfolios with transformative trends and carefully managing risks, investors can uncover value in an increasingly complex landscape.
