Recently, Allianz Investment released its 2025 market outlook report, analyzing future trends in the global economy and providing asset allocation advice for investors. The report indicates that the U.S. economy is expected to achieve a soft landing, meaning inflation will slow and the U.S. economy will avoid a recession. This outlook boosts the performance of risk assets, especially U.S. stocks. Although U.S. stock valuations are already high, their potential continues to attract investors. Allianz believes that in 2025, investors should focus on the U.S. stock market, particularly technology stocks and other growth sectors, which are likely to continue performing strongly, driven by economic growth and innovation.
Prospects for a Soft Landing in the U.S. Economy
Allianz Investment's basic forecast for the U.S. economy is that it will achieve a soft landing, where economic growth slows but does not enter a recession. Inflation is expected to continue to decline, providing the Federal Reserve with room to cut interest rates further. As the U.S. election results become clearer, political uncertainty decreases, market sentiment gradually recovers, and investor confidence in the U.S. economy grows. Despite high valuations, U.S. stocks remain attractive for capital inflow compared to other global markets. Allianz notes that particularly in the fields of technology and innovation, U.S. companies maintain global competitiveness, which will continue to drive stock market growth.
Global Economic Divergence and Risks
However, Allianz also points out that global economic growth will exhibit a divergence. The U.S. economy may continue to outpace Europe and Japan, particularly if President Trump is re-elected, leading to more complex trade policies and geopolitical risks. Trump's potential continuation of tariff hikes and trade protectionism policies will require a readjustment of global supply chains and trade patterns. This presents challenges for investors and implies heightened geopolitical risks, increased global capital flows, and stock market volatility.
Bond Market and Inflation Risks
In the bond market, Allianz expects the Federal Reserve to continue its rate cut policy, but the risk of inflation resurgence remains. If inflation fails to slow as expected, the Fed's rate-cutting agenda might be limited, leading to market misalignments. Allianz advises investors to remain vigilant, especially considering inflation's possible impact on the bond market within asset allocations. Investors might consider shifting some funds from cash and low-risk money market funds to moderate-risk fixed-income assets or increasing exposure to private markets to balance risk investments.
Attraction of Illiquid Assets
With the implementation of new regulations in Europe, the inflow of retail investor funds is accelerating, boosting growth in illiquid assets such as private debt and infrastructure. These assets generally have low liquidity requirements but can provide stable returns in long-term investments. Allianz believes that as global funds continue to seek diversified investment tools, illiquid assets will become increasingly important, especially amid heightened market uncertainty.
Investment Advice: Diversified Asset Allocation
For future investment strategies, Allianz recommends investors focus on three main directions:
- Growth Technology: Continue to focus on technological innovation and corporate growth in fields such as electronics, communications, computing, and defense, particularly U.S. tech stock investment opportunities.
- Economic Recovery: As the global economy gradually recovers, investors can focus on industries such as automotive, home appliances, and companies related to base metals and construction materials.
- Real Estate Chains Benefiting from Economic Recovery: As the real estate market warms, related industries such as real estate, home appliances, and furniture may also present investment opportunities.
Allianz Investment also notes that as capital markets continue to evolve, illiquid assets will become an important part of investment portfolios. These assets typically have lower market volatility, helping investors achieve diversification and risk balancing in a high uncertainty environment.
Conclusion
Overall, Allianz Investment's report indicates that the U.S. economy will continue to grow steadily and achieve a soft landing by 2025. Despite potential risks such as global economic divergence and inflation resurgence, investors should focus on opportunities arising from technological innovation and economic recovery while considering asset allocation adjustments to increase the proportion of illiquid assets. This approach will lead to better risk management and returns in future market conditions.
