State Street Optimistic About US Equities and Fixed Income in 2025
State Street Global Advisors, the asset management arm of State Street Corporation based in Boston, has released its 2025 Global Market Outlook, titled “Finding the Right Path.” This report shares their macroeconomic outlook and key investment themes for the upcoming year.
In 2024, we saw resilient economic conditions and central banks easing up, resulting in robust returns in equity markets and more modest returns in fixed income markets. Looking forward to 2025, State Street Global Advisors predicts continued rate cuts and economic resilience, forecasting a soft landing in the US.
Lori Heinel, the global chief investment officer, acknowledges that 2024 was anything but ordinary. With elections worldwide, ongoing inflation, and market volatility, the macroeconomic landscape was uncertain. However, despite these challenges, markets remained resilient. As we head into 2025, Heinel remains cautiously optimistic, expecting a US soft landing and urging investors to consider overweighting equities in their portfolios.
State Street Global Advisors anticipates that the rate cut trend from 2024 will continue into 2025, with potential shifts in narrative depending on political outcomes. They also remain positive about fixed income in the coming year, citing the potential for central banks to further lower policy rates due to slowing economic growth and tame inflation.
In the realm of global equity markets, State Street Global Advisors sees strong support for earnings, particularly in the US, with opportunities in various markets outside the US. They highlight the need for investors to navigate short-term uncertainties and long-term structural changes such as demographic shifts and technological advancements.
In addition to State Street Global Advisors, other wealth management firms like Northern Trust Asset Management, UBS Global Wealth Management, Pictet Asset Management, and Goldman Sachs Asset Management also favor US equities in 2025. Northern Trust Asset Management specifically sees potential in high yield bonds due to yields, strong fundamentals, and market conditions.
Looking beyond traditional asset classes, State Street Global Advisors encourages investors to explore diversification through real assets, commodities, infrastructure, digital assets, and private assets. This can offer higher returns, lower volatility, and increased diversification in portfolios.
The emergence of the Gulf Cooperation Council region as an investment destination and the impact of transformative technologies like artificial intelligence and tokenization are also highlighted by the firm as important considerations for investors in 2025. The GCC region’s growth potential and the potential benefits of alternative exposures are key factors to watch in the coming year.
