LGT Private Banking House View

April 2025 - in a nutshell

As we navigate the first quarter of 2025, the global economy is experiencing significant shifts, increasingly questioning fundamental beliefs that have held true for years. The resilience seen in 2024 has given way to a more complex landscape: The erratic US policies, a chaotic trade war, geopolitical tensions and Europe’s fiscal plans are starting to show their effects, and the long-standing US exceptionalism in growth seems to be weakening.

Date 27 March 2025
Author Gérald Moser, CIO & Head Investment Services Europe
Reading time 7 minutes

With the new administration at the helm, the US economy is facing headwinds: Consumer sentiment has cooled, and persistent inflation, coupled with fears of rising protectionism, has dampened expectations for interest rate cuts. This has led us to revise our US GDP growth forecast for 2025 down to 1.5%. We also question the growth in US corporate earnings reflected in consensus estimates and expect further downward revisions, which led us to move towards a tactical "Underweight" in US equities.

In contrast to the US, Europe is showing signs of economic revitalisation. Significant fiscal packages, such as Germany’s EUR 500 billion investment in military and infrastructure and the EU’s EUR 800 billion defence spending, are expected to stimulate growth. This fiscal stimulus is likely to narrow the growth gap between the US and Europe, presenting new opportunities for investment.

Despite the challenges posed by geopolitical tensions and erratic trade policies, we are well prepared to steer safely through this environment. Our diversified investment approach, combined with a focus on high-quality assets, ensures that we can manage risks effectively while seeking growth opportunities. Our commitment to protecting and growing your wealth remains our top priority, and we are confident in our ability to steer through these turbulent times with prudence and foresight.

Macroeconomic environment

The global economy showed resilience in 2024, driven by US strength, but signs of cooling US consumption and persistent inflation have emerged in 2025. The US trade war and European fiscal plans are reshaping growth dynamics, with Europe’s recovery and US moderation narrowing the long-standing American exceptionalism. This shift is likely to result in slower global growth, elevated volatility, and increasing uncertainty regarding the economic outlook.

Investment strategy

The market narrative has evolved and is now focused on the potential damage to US economic growth, including the uncertainty created by the change in US trade tariff policy. The pullback in the equity market is particularly pronounced in the US and in technology-related segments and does not appear to be spreading meaningfully beyond equities. We therefore view this as a correction that is contained for the time being and largely rational given the altered economic backdrop. As a result, we are not changing our risk appetite as reflected in our tactical investment strategy, but are adjusting our intra-equity positioning, while leaving the other asset classes unchanged. Within equities, we reduce US equities to "Underweight" compared to the strategic weight and increase Swiss equities to "Overweight". Eurozone equities remain unchanged at "Overweight", while emerging market equities stay "Underweight".

Equity strategy

The positive momentum in European equities is expected to continue, with the MSCI Eurozone index reaching its ten-year average valuation. Despite potential challenges from US trade tariffs affecting certain European industries, substantial fiscal stimulus from the EU and Germany is anticipated to boost sentiment and support equity prices. Swiss equities are also seen as attractive, benefiting from increased European economic activity due to the stimulus. Swiss stocks offer defensive stability with lower sensitivity to global market fluctuations, making them appealing in the current uncertain environment. Consequently, we have increased our position in Swiss equities to "Overweight" in our tactical portfolio allocation.

Fixed-income strategy

Bond markets have seen another month of significant moves, driven by the substantial fiscal spending plans in Europe, which have pushed the long end of the euro curve markedly higher. While structural factors support higher yields in the long term, our short-term view is that markets may have overreacted and overestimated fiscal implementation in the short term.

Currency strategy

The US dollar’s initial post‑election strength has waned amid concerns about unpredictable policy actions, a soft labour market, and slower economic momentum. Yield-driven support for the dollar is fading, while structural weaknesses such as high debt levels and a persistent current account deficit weigh on its outlook. At the same time, the euro benefits from improving sentiment in the euro area and more stable political conditions. That being said, a rebound in the US growth trajectory following a gold import-driven decline could lend modest near‑term support to the greenback; also, any materialisation of a higher risk of recession in the United States would likely have spillover effects on global economies, particularly the export-reliant eurozone, potentially constraining the euro and testing these forecasts. We set our forecasts to EUR/USD 1.07 over six months and 1.09 in 12 months.

General risk information

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Risk information for single stock/single bond recommendations

Responsibilities

Responsible for compilation: LGT Bank (Switzerland) Ltd., Lange Gasse 15, CH-4002 Basel, Switzerland. Responsible supervisory authority: Swiss Financial Market Supervisory Authority FINMA, Laupenstrasse 27, CH-3003 Berne, Switzerland. Responsible for distribution within the meaning of article 8 FinMV [Financial Analysis Market Abuse Ordinance]: LGT Bank Ltd., Herrengasse 12, 9490 Vaduz, Principality of Liechtenstein. Responsible supervisory authority: Liechtenstein Financial Market Authority (FMA), Landstrasse 109, P.O. Box 279, 9490 Vaduz, Principality of Liechtenstein. Responsible for distribution within the meaning of the Directives on the Independence of Financial Research from the Swiss Bankers Association (SBA): LGT Bank (Switzerland) Ltd., Lange Gasse 15, CH-4002 Basel, Switzerland. Responsible supervisory authority: Swiss Financial Market Supervisory Authority FINMA, Laupenstrasse 27, CH-3003 Berne, Switzerland. Responsible for distribution within the meaning of section 48f BörseG [Stock Exchange Act] and the circular regarding financial analysis in connection with the interpretation of section 48f Stock Exchange Act [Börsegesetz (BörseG)]: LGT Bank AG, Zweigniederlassung Österreich, Bankgasse 9, A-1010 Vienna, Austria. Responsible supervisory authority: Liechtenstein Financial Market Authority (FMA), Landstrasse 109, P.O. Box 279, 9490 Vaduz, Principality of Liechtenstein; Austrian Financial Market Authority (FMA), Otto-Wagner-Platz 5, 1090 Vienna, Austria.

Precautions for avoiding and dealing with conflicts of interest

Employees of LGT Capital Partners Ltd., Pfäffikon, LGT Bank Ltd., Vaduz, LGT Bank (Switzerland) Ltd. and LGT Bank AG, Zweigniederlassung Österreich, who are responsible for compiling and/or distributing financial analyses, are subject to the applicable regulations as prescribed by law and supervisory legislation. In particular, measures were taken to avoid conflicts of interest (e.g. checking information exchanged with other employees, independence of the remuneration of the employees concerned, preventing the exertion of influence on these employees, compliance with rules on employee transactions, etc.). In addition, the handling of financial analyses is governed by an internal, group-wide directive issued by LGT Group Foundation, Vaduz. Adherence to the regulations and organizational instructions is monitored by a Compliance Officer.

Reference regarding analysis history

If this analysis was made available to any issuers mentioned in the publication prior to its distribution or publication, no changes were made to the price or rating after the issuer’s feedback. Important references for Liechtenstein can be found in articles 3 to 6 FinMV [Financial Analysis Market Abuse Ordinance], for Switzerland in the Swiss Bankers Association Directives on the Independence of Financial Research, and for Austria in section 48 BörseG [Stock Exchange Act], the Austrian analysis principles of the Österreichische Vereinigung für Finanzanalyse und Asset Management [Austrian Association for Financial Analysis and Asset Management, ÖVFA] and the Austrian Society of Investment Professionals (ASIP) and the Standard Compliance Code of the Austrian banking sector. A history of all ratings and recommendations is available at your LGT relationship manager.

Essential sources of information

Our analysts draw on publicly accessible information we consider to be reliable. For the compilation of the analysis, publications by domestic and foreign media and news services (e.g. Reuters, Bloomberg, VWD etc.), business publications, trade publications, statistics and rating agencies were used, together with information from the issuers of the analyzed securities – mainly via the Internet, but also in writing or by telephone. We also procure information from investment banks (sell-side research and primary research).

Reference regarding valuation rates

Unless otherwise stated or specified, the rates used in the analysis are normally the share prices provided by the news agencies Reuters and/or Bloomberg at the close of the stock exchange of the domestic market of the analyzed security or the relevant principal market of this security on the respective local stock exchange on the eve of the day of compilation.

Explanation of investment recommendations for stocks

We apply a “hybrid approach” (internal fundamental analysis combined with “theScreener”, an external, purely quantitative analysis tool). TheScreener is based on purely quantitative, i.e. computable variables such as (but not exclusively restricted to) profit adjustments of the past few weeks, stock valuation in relation to historical performance and comparison groups, the technical trend, performance in relation to the market etc. The assessment of the equity analysts, which is largely based on a qualitative analysis, does not need to match with the one of theScreener. For the overall judgement the assessment of the equity analysts overrides the one of theScreener. LGT Bank (Switzerland) Ltd. categorizes its analysis recommendations into five ratings: for a “Buy” recommendation we expect a relative outperformance compared with the sector. Only equities subjected to an internal fundamental analysis can be rated “Buy”. The recommendation “Attractive” is used for equities exclusively ranked by theScreener without any internal fundamental analysis as “slightly positive” or “positive”. A moderate relative outperformance versus the index is expected. For equities that we rate as “Hold” we expect a performance largely in line with the one of the sector. This can comprise both equities for which a fundamental analysis has been carried out as well as equities that theScreener ranks as “neutral” versus the index. The recommendation “Unattractive” is used for equities exclusively ranked by theScreener without any internal fundamental analysis as “slightly negative”. A moderate relative underperformance versus the index is expected. By contrast, “Sell” recommendations are based on the expectation of a relative underperformance compared with the sector. This can comprise both equities for which we are recommending “Sell” for fundamental reasons as well as equities that theScreener ranks as “negative” versus the index. Therefore the ratings always reflect a relative consideration versus the sector and/or specified index. The risk assessment is based on the individual judgement of the analyst (e.g. we assume a “high” risk for illiquid shares, highly indebted companies or shares from developing countries).

Reference regarding share valuation basis: The analysis compiled by LGT Bank (Switzerland) Ltd. are essentially based on secondary research relating to fundamental and quantitative analysis. Generally accepted valuation methods (valuation multiples, return figures, sector comparisons, comparisons with past valuations etc.) are used for this. The forecasts for the quantitative analysis are prepared with the help of mathematical-statistical procedures (see statements above concerning the analysis tool “theScreener”). Economic indicators such as interest rates, currencies, commodity prices and assumptions relating to the economy are included in the overall assessment. The mood of the market also affects the company valuation. Moreover, many of the approaches are based on estimates and expectations that may change quickly and without warning, depending on developments specific to the industry. Therefore, the recommendations derived from the analysis can also change accordingly. The investment judgements generally refer to a period of 6 to 12 months. However, they are also subject to market conditions and represent a snapshot of the situation. They may be achieved more quickly or more slowly or be revised upwards or downwards.

Explanation of investment recommendations for bonds

We employ both qualitative and quantitative methods to derive our recommendations, which are to be seen as relative to sector/quality peers among comparable maturities. “Buy” and “Sell” recommendations demand a qualitative in-house analyst opinion, in which we incorporate both historical and projected financial results and credit metrics as well as past and anticipated company and sector-specific observations and trends. We recommend “Buy” for a security for which we expect a strong relative outperformance compared to sector/quality peers among comparable maturities. We recommend “Sell” if we expect strong relative underperformance compared to sector/quality peers among comparable maturities. The ratings “Attractive”, “Hold” and “Unattractive” can be based purely on a quantitative approach, which includes the market price of credit risk, valuation of equities and associated instruments, corporate leverage, liability structure, size, and agency rating. We recommend “Attractive” for a security for which we expect a relative outperformance compared to sector/quality peers among comparable maturities. We recommend “Hold” if we expect an average performance compared to sector/quality peers among comparable maturities. We recommend “Unattractive” if we expect a relative underperformance compared to sector/quality peers among comparable maturities.

This publication does not constitute either an issuing or listing prospectus, nor any other kind of prospectus. This publication also does not constitute any offer for subscription or any other transaction or obligation.

Definition of rating categories of S&P and Moody’s which are relevant for us:

AAA/Aaa: Borrower with highest credit quality. Default risk also virtually negligible over the longer term
AA/Aa: Safe investment, default risk virtually negligible but more difficult to assess in the longer term
A: Safe investment as long as no unforeseen events impair the overall economy or sector
BBB/Baa: Average investment. However, problems must be expected if the overall economy deteriorates
BB/Ba: Speculative investment. Defaults must be expected if the economic situation deteriorates
B: Highly speculative investment. Defaults are likely if the economic situation deteriorates

For more information on our methodology for bonds, please contact your LGT relationship manager or your local LGT Group company.

Risk information for fund recommendations

No guarantee is provided that the publications and information are up to date. Investment decisions should therefore always be made on the basis of the current prospectus and/or the complete documentation and publication of the third party/fund issuer (in particular the key investor information) and following consultation with an expert. This fund recommendation does not meet all the statutory requirements for guaranteeing the impartiality of financial research. The Swiss Bankers Association Directives on the Independence of Financial Research do not apply to this recommendation. It does not constitute financial analysis within the meaning of the Liechtenstein Ordinance on the Preparation of Financial Analysis according to the Law against Market Abuse in the Trading of Financial Instruments. LGT Bank (Switzerland) Ltd. and/or its affiliated companies are not subject to any prohibition of trading prior to the publication of financial research with regard to the recommended funds. The research can form the basis for the investment decisions of LGT Bank (Switzerland) Ltd. itself and/or those of its affiliated companies. It is possible that LGT Bank (Switzerland) Ltd. and/or its affiliated companies might receive retrocessions from the issuers of the funds dealt with here.

All selected third-party funds are subjected to a thorough quantitative and qualitative analysis process prior to inclusion in the LGT FundGuide. Selected third-party funds are also subject to a continuous monitoring process. Austria: Investment decisions should only be made on the basis of the current KIID and valid prospectus following consultation with an expert.

Country-specific information

LGT funds: The current full prospectus, the Key Investor Information Document (KIID) and the current annual and semi-annual reports can be obtained free of charge from the fund administrator and from the following addresses: Liechtenstein: LGT Bank Ltd., Herrengasse 12, FL-9490 Vaduz and as an electronic version at www.lafv.li; representative for Switzerland: LGT Capital Partners Ltd., Schützenstrasse 6, CH-8808 Pfäffikon; main distributor and paying agent for Switzerland: LGT Bank (Switzerland) Ltd., Lange Gasse 15, CH-4002 Basel; paying agent in Austria: Erste Bank der österreichischen Sparkassen AG, Am Belvedere 1, A-1010 Vienna.

Risk information for recommendations concerning structured products

This recommendation was prepared by LGT and not by an independent financial analysis department. Therefore this recommendation does not meet all the statutory requirements for guaranteeing the impartiality of financial research. The Swiss Bankers Association Directives on the Independence of Financial Research do not apply to this recommendation. Investments in structured products entail a wide range of risks. Investment decisions should therefore only be made on the basis of the valid prospectus or complete documentation following consultation with an expert. This does not constitute financial analysis within the meaning of the Liechtenstein Ordinance on the Preparation of Financial Analysis according to the Law against Market Abuse in the Trading of Financial Instruments.

Risk information in connection with foreign currencies

Information about foreign currencies were produced by LGT Bank (Switzerland) Ltd. and not by an independent financial analysis department. Therefore, forecasts, observations and price information are subject to change at any time and there is no guarantee that the information is complete. Investment decisions should accordingly be made in consideration of the investor’s personal risk tolerance and within the overall context of the portfolio. The Swiss Bankers Association Directives on the Independence of Financial Research do not apply to currency analysis. Such analyses do not constitute financial analysis within the meaning of the Liechtenstein Ordinance on the Preparation of Financial Analysis according to the Law against Market Abuse in the Trading of Financial Instruments.

Risk information on LGT Sustainability Rating

To determine the LGT Sustainability Rating, the companies, countries and supranational organizations underlying the investment vehicles are assessed according to criteria defined by LGT with respect to the areas of environment (E), social issues (S) and corporate governance (G). Corporate and country-specific sustainability data (raw data) of external data providers feed into this rating. The LGT Sustainability Rating is a result based on criteria and calculation methods determined by LGT. It does not claim to be exhaustive, accurate or up to date. The LGT Sustainability Rating is not substantiated by LGT. Any liability of LGT is excluded. The LGT Sustainability Rating does not constitute advice, an offer, a solicitation or invitation to submit an offer; it is neither a basis for a decision nor a recommendation to buy or sell investment vehicles or other specific products, and does not constitute advertising for products or services. Advice from a qualified specialist before making an investment decision is recommended. Investments may be subject to fluctuations. A high LGT Sustainability Rating and a high ESG score do not guarantee a good or better performance of the investment vehicle or other products, in particular in comparison with an investment with a lower LGT Sustainability Rating. The LGT Sustainability Rating must be strictly separated from other analyses and assessments.

Risk information for US assets

This investment proposal might contain US assets located in the USA (known as “US situs assets”) which might trigger US inheritance tax consequences. This means, for example, that the estate of the decedent neither domiciled in the USA nor with US citizenship might become liable for tax payment to the US tax authority. Subject to a ceiling, non-US persons may enjoy tax exemptions and reductions if they are entitled to benefit from a double taxation agreement (DTA) which provides for such relief. LGT recommends that clients consult a qualified tax advisor for further information on US inheritance tax and the associated reporting obligations and tax liabilities in the USA. LGT does not automatically report tax liabilities to the Internal Revenue Service (IRS), the US tax authority.

Information related to LGT (Middle East) Ltd.

Where this publication has been distributed by LGT (Middle East) Ltd., related financial products or services are only available to professional investors as defined by the Dubai Financial Services Authority (DFSA). LGT (Middle East) Ltd. in the Dubai International Financial Centre (Registered No. 1308) is regulated by the DFSA. LGT (Middle East) Ltd. may only undertake the financial services activities that fall within the scope of its existing DFSA license. Principal place of business: The Gate Building (West), Level 2, Dubai International Financial Centre, P.O. Box 506793, Dubai, United Arab Emirates.