Interview, Fireside Chat
Keep on truckin’: Will the US continue to outperform other markets?
- U.S. preeminence in investment themes is projected to persist without foreseeable change, with the country expected to continue outperforming other nations as the performance gap widens.
- U.S. GDP growth is forecast to remain well above trend lines at approximately 2.3 percent, supporting strong earnings performance for American companies.
- Equity valuations are anticipated to decline modestly over the next five years, though a return to long-term post-World War II averages is deemed unlikely.
- The base case for U.S. equity returns in 2025 is set at 8 percent, with a reasonable probability for upside performance exceeding this target.
- Interest rates are expected to trend downward in the base case scenario due to a gradual reduction in inflation, which itself is predicted to continue its slow, steady decline without dramatic spikes.
- Incremental tariffs are anticipated to be implemented, though not immediately reaching the full levels discussed during the election campaign.
- Market volatility is expected to increase resulting from the uncertain nature of tariff negotiations and trade war concerns.
- Corporate interest burdens are not expected to become a major constraint, as most U.S. corporate debt remains fixed at historically low rates.
- A debt trajectory crisis requiring budget deficit intervention is not expected to occur within the next one to two years.
- Private assets, specifically buyout and growth equity, are expected to outperform non-U.S. developed and emerging market equities over the next decade.
- Non-U.S. developed markets are projected to appear less cheap than currently assessed when adjusted for sector composition, specifically due to a lower weight of high-valuation technology sectors.
- Non-U.S. markets are expected to face severe impacts from China's economic slowdown, which is forecast to continue steadily.
- China's economic trajectory is projected to mirror Japan's post-bubble path, characterized by inevitable slowdowns driven by demographics and other headwinds.
- Chinese equity markets are expected to offer trading opportunities rather than sustainable long-term investing environments, with rallies anticipated to be limited in duration.
- Gold prices are expected to be driven primarily by central bank and consumer purchases from China rather than inflation hedging demand.
- The duration of gold price drivers related to China's diversification away from sanctions risks is not predictable over the long term, advising against tactical engagement in gold pricing.
- Bitcoin and cryptocurrencies are expected to continue lacking a legitimate underlying investment rationale, remaining classified as speculative trading assets.
- Strategic asset allocation is expected to be the most effective method for clients to withstand portfolio volatility, rather than derivatives hedging.
- Long-term high-quality fixed income is expected to serve as the best hedge for client portfolios against interim volatility.