LGT Private Banking House View

March 2025 - in a nuthshell

Growing uncertainties and an unsettled global economy are shaping our current investment strategies. In particular, the rather erratic US trade policy of the new Trump administration is having a significant impact on the global economy, leading to unpredictable economic outcomes and a stronger reliance on scenario analyses. 

  • Date
  • Auteur Gérald Moser, Head Investment Solutions Europe, LGT Private Banking
  • Temps de lecture 7 minutes

Trade war
© Shutterstock

Macroeconomic environment

The global economy is being reshaped in 2025 by unpredictable US trade policies amid resilient growth in major markets. Rising trade tensions and tariff uncertainties create a broad spectrum of potential economic outcomes, forcing forecasters to think in scenarios. Against this backdrop, investors and policymakers must be highly adaptable as these evolving dynamics have major implications for the global economy and inflation.

Investment strategy

We maintain a “Neutral” equity stance, with an “Overweight” in European stocks and an “Underweight” in emerging markets. In fixed income, we remain “Underweight”, with a preference for underweighting EM hard currency bonds. Despite rising inflation expectations, we forecast the Federal Reserve (Fed) will pause interest rate cuts in the first half of 2025, while we anticipate the European Central Bank (ECB) to reduce rates by 100 basis points this year. Meanwhile, gold remains a recommended hedge in our view.

Equity strategy

European stock markets have achieved a new all-time high despite heightened economic policy uncertainty and rising inflation. Last November, we deemed European equities attractive for their return potential, leading to a tactical “Overweight” in portfolios. The recent market uplift is attributed to hopes of reduced US trade tariffs and a potential ceasefire in Ukraine. However, volatility is expected to increase, and while European equities show promising momentum, we think that profitability improvements are needed. Emerging markets face challenges from higher US rates and a strong dollar, with China’s economy struggling and trade tariffs impacting growth.

Fixed-income strategy

Bond markets have experienced significant movements in recent months, particularly at the long end of the curve. As a result, the term premium has risen significantly in both the US and Europe. While inflation uncertainty remains high in the US, the eurozone offers an increasingly attractive opportunity to lengthen government bond duration. We forecast the ECB to cut 100 basis points by the end of 2025, which will push down not only short-term yields but also long-term yields.

Currency and gold strategy

As global policy dynamics evolve, both the euro and gold are expected to show slight upward trajectory in our view. While the initial post-election rally strengthened the US dollar, underlying global dynamics and fiscal risks suggest a limited scope for further gains, and hence, we set our EUR/USD target now at 1.055. The euro benefits from a marginally improved sentiment and strong external balances, while the greenback faces pressures from policy uncertainties, dual deficits, and monetary easing despite sticky inflation. Meanwhile, gold remains an attractive asset amid inflationary pressures, geopolitical risks, and increasing central bank demand, with a revised price target of USD 3000.

The Strategist Shaken, not stirred: sticky inflation, tariff turmoil and Fed’s independence tested Tous les articles LGT Private Banking House View April 2025 - in a nutshell
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