Shifts & Trends

EFG 2025 Outlook: Top 10 Trends

5 Minutes read

Key insights from our last online talk, "EFG 2025 Outlook: Top 10 Trends", featuring Moz Afzal.

1. Resilient Global Economy

Economic growth is expected to remain strong despite uncertainties.
Interest rate cuts will likely boost economic activity, with the second half of the year being stronger than the first.
Governments are avoiding fiscal tightening, keeping spending high to support growth.

2. Growing Influence of BRICS

BRICS (now 10 countries) accounts for 50% of global GDP.
This bloc is becoming an alternative to the US-led economic order.
Potential trade wars and geopolitical tensions could arise as BRICS strengthens.

3. Shift in Policy Focus: From Inflation to Employment

Inflation concerns are declining, allowing central banks to lower interest rates.
The new focus is on employment, particularly for lower-income groups, due to rising delinquencies in mortgages, car loans, and credit cards.

4. Government Deficits and the "DOGE" Experiment

The US aims to cut government spending by $2 trillion over 10 years through private-sector-driven efficiency programs.
The DOGE (Department of Government Efficiency) experiment raises questions: Can private enterprise run government functions more efficiently?

5. AI Goes Mainstream

The US leads AI investment ($320 billion), while Europe lags behind.
2025 AI infrastructure spending is expected to exceed $350 billion.
The key challenge: Will these investments generate profits?

6. The Rising Importance of Nuclear Energy

AI and EVs are increasing electricity demand.
China leads nuclear energy expansion, while the US has minimal new investments.
The expectation is that the US may announce new nuclear energy initiatives to remain competitive.

7. Corporate Earnings Growth

Earnings are expected to grow by 12-14% in 2025, led by IT (22% expected growth).
However, if major tech firms (Google, Microsoft, Nvidia) fail to meet expectations, their high valuations could be at risk.

8. Market Concentration Risk

The S&P 500 is dominated by a few large tech firms, reaching concentration levels last seen in the 1960s.
Historically, when market concentration peaked, those leading firms eventually underperformed.
A shift towards small/mid-cap stocks and global diversification is advised.

9. Consumer Discretionary Sector Rebound

Americans' net worth grew by $15 trillion in 2024, driven by stocks, real estate, and crypto.
Luxury and discretionary spending will increase, benefiting premium brands and travel industries.
Companies like Ferrari and high-end retailers are already seeing record profits.

10. Yield Curve Steepening & Interest Rate Outlook

The US 10-year Treasury yield is expected to reach 5.25%.
A normalizing yield curve signals economic stabilization, reducing recession risks.

Additional Insights from the Q&A

Crypto Outlook

Regulatory clarity under Trump may benefit crypto.
However, greater transparency may reduce market inefficiencies and potential gains.

Mexico & US Trade Tariffs

Expected 10% tariffs on Mexican goods, but no extreme trade disruption.
Mexican peso has already adjusted, offsetting much of the impact.

Latin America Economic Outlook

Argentina (under Milei) is aligned with Trump's policies and may benefit from closer US relations.
Brazil's economic fundamentals are improving, but a change in government (expected 2026) could further boost growth.

US Real Estate Market

Higher-end real estate remains strong due to wealth effects.
Lower-end housing is struggling due to high mortgage rates.

Conclusion

The 2025 outlook remains optimistic with strong economic resilience, growth in corporate earnings, and new investment opportunities in AI, nuclear energy, and emerging markets. However, investors should be mindful of geopolitical risks, market concentration, and sectoral shifts due to changing consumption habits.