In recent years, financial markets have come through turbulent waters due to unprecedented challenges: negative interest rates in the Eurozone; a global pandemic and the resulting supply chain disruption; finally, a severe inflationary shock. The global economy was beset with uncertainty at every turn and, in response, policymakers had to take emergency measures and proceed with extreme caution.

Now, however, the clouds are beginning to clear. Economies and markets are returning to normal, and investment opportunities are taking a more definite shape. We are now entering a scenario in which strategic decisions based on economic fundamentals will make sense again. The outlook for global growth in 2025 - which we believe will be close to 3% - inspires renewed confidence.

Moreover, inflation is on the wane. As central banks approach their targets, they will be able to loosen monetary policy. Against a background of stable growth, this environment could prove ideal for investment in risk assets such as equities and debt, where the benefits of carry trades and duration are combined. Diversification will be critical to maximizing returns and managing risk: each portfolio must be tailored to the specific investor.

Looking ahead to 2025, we expect the global economy to continue its return to normal in terms of growth, inflation and monetary policy. However, each of these variables will improve at its own pace.  

A positive, albeit moderate, growth environment in Europe and a normalization of inflation and monetary policies make corporate bonds attractive. Increasing portfolio duration and betting on positive carry offers value, supported by confidence in the health of the corporate sector as reflected in the credit spreads.

The degree of monetary normalization varies by geography.

Looking to the future, Generative AI 2.0 has become a key catalyst for growth because of its ability to transform industries and redefine productivity. According to McKinsey (1), the impact of generative AI could add trillions of dollars to the global economy. To identify those industries, and companies, in which the activities that are most enriched by generative AI have the greatest weight is to identify those that may have the greatest potential to boost their profits and contribute to economic growth. McKinsey’s most recent projections (1) indicate a significant impact in the following sectors:

(1) MckKinsey & Company. The economic potential of generative AI: The next productivity frontier. June 2023

In 2025, navigating the return to normal will require focus and the ability to adapt swiftly to change, but, for investors who are able to see and grasp the opportunities this new chapter will offer, the future is bright.

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