2025 Global Economic and Market Outlook: Vanguard Summary
Global inflation has decreased significantly over the past two years and is now approaching 2%. Different countries and regions have taken varying paths to achieve this, with most developed markets going through slowdowns due to monetary policy adjustments. Surprisingly, the United States stands out as an exception, with strong economic growth and full employment despite high-interest rates.
The big question on everyone’s mind is whether the U.S. has achieved a smooth transition or if the impact of these high rates will eventually cause a rough landing. The focus has been on whether the U.S. Federal Reserve can time its rate cuts perfectly to achieve a painless decrease in inflation. However, there might be more to the story than just the smoothness of the landing.
Looking ahead to 2025, we’re shifting our perspective to focus on the supply-side factors that have been influencing the U.S. economy. These factors include a significant increase in labor productivity and a growing labor pool. By considering these supply-side elements, we get a better understanding of the positive growth and inflation trends we’ve been seeing. This framework also allows us to better assess potential risks like immigration policies, geopolitical events, or tariffs that could impact the economy moving forward.
