Link
As 2025 begins under the shadow of uncertainty—driven in particular by the initial measures taken by President Trump—how should investors position themselves in the markets?
Find out in our video with Sebastian Paris Horvitz, Head of Research at LBP AM.
Protectionist measures have disrupted the economic horizon and affected the markets. In the face of the historic increase in customs duties announced by the United States, growth forecasts for the global economy in 2025 have been drastically revised downwards, particularly with strong risks of recession in the United States. US inflation has also been revised upwards.
Since then, the US government has begun a chaotic retreat on the level of customs duties it wanted to impose. Negotiations are underway. The most likely outcome is that the customs duties will be much lower than those initially announced.
Nevertheless, in our view, the customs duties that will ultimately be imposed will be historically high. Although the worst-case scenario has been avoided, global growth will be adversely affected, not to mention the negative impact on business of the constraints on immigration across the Atlantic.
To partly offset these negative effects on activity, central banks are expected to continue the monetary easing begun last year.
The reduced likelihood of the most adverse scenarios linked to U.S. policies has encouraged a return to risk-taking in the markets. However, given the high level of prevailing uncertainty, we are adopting a relatively cautious strategy—avoiding both excessive pessimism and unwarranted optimism.
We maintain a neutral stance on sovereign bonds. We continue to benefit from carry on the short end of the yield curve and from the protective qualities of this asset class in the event of negative economic surprises, given the current high level of uncertainty.
We are more constructive on European credit. We continue to favor high-quality bonds and maintain strong exposure to Investment Grade. We are also increasing our allocation to riskier segments such as High Yield, while remaining highly selective. In particular, we avoid sectors most affected by U.S. protectionist measures.
While we understand the sense of relief brought by the softening of the U.S. stance on tariffs, we remain very cautious—especially on U.S. equities. In our view, markets are underestimating the negative impact of protectionist policies on corporate earnings. Despite lingering uncertainties, valuations have returned to demanding levels. We are also cautious on European equities following their strong performance and remain more constructive on emerging markets.
Given the high level of uncertainty about the future, agility in asset allocation is essential. This is crucial to navigate an environment that may experience abrupt shifts—particularly as a result of decisions made by U.S. authorities.
Les opinions exprimées (i) sont considérées comme fiables par LBP AM et fondées ou justifiées en fonction du contexte économique, financier, boursier et réglementaire et (ii) sont fournies uniquement à titre d’information.