Weaker global growth expected, but opportunities exist in selected markets

Although global economic growth is expected to be weaker during 2025 than in recent years, it is set to remain stable. A positive trend is being observed in the US, in particular, while the Eurozone is faced with structural challenges. Despite these imbalances, markets such as high-yield bonds, Swiss real estate and selected equities continue to be the source of attractive opportunities. Commodities and digital assets are also benefiting from solid demand and the current environment.

While the International Monetary Fund expects global economic growth this year to be somewhat weaker than the average of the past 25 years or so, it is still anticipated to be solid at 3.3%. This is primarily thanks to a higher growth forecast for the US of +2.7%, a whole 0.5% higher than had previously been anticipated. Significantly less growth of 1% is expected for the Eurozone, primarily due to the structural industrial problems faced in Germany and France. New economic data indicates an improvement in industrial activity in both the US and Europe, albeit at a lower level in the latter’s case, as well as in China. Consumer activity in the US remains stronger than in Europe thanks to persistently low levels of unemployment by historical standards.
 

Currencies

The interest rate differential between the US dollar and the euro as well as the Swiss franc will remain high for the foreseeable future. The robust US labour market is not anticipated to weaken markedly, which will lend support to the purchasing power of US consumers. In contrast, Switzerland and the Eurozone are struggling with weak growth. We are therefore holding on to our positions despite the historic strength of the US dollar, as the fundamental conditions continue to strongly support the greenback.
 

Bonds

Persistently low volatility is favouring carry-trades and making high-yield bonds attractive. On average, high-yield bonds offer returns that are approximately 1.5% higher than their investment-grade counterparts. Despite continued high interest rates, companies have to date not had any difficulties in refinancing their debt, suggesting that the currently historically low risk premiums could persist for longer. In an economic environment where corporate earnings remain relatively robust, high-yield bonds continue to present an attractive opportunity to benefit from higher interest rates. High-yield bonds could therefore outperform investment-grade bonds in this stable market. For these reasons, the underweight position in high-yield bonds is being lifted, with a shift now being made to a neutral weighting at the expense of investment-grade bonds.

TAA Balanced CHF

Indirect real estate

The environment for Swiss real estate investments remains good. Expected interest rate cuts and the positive macroeconomic environment in Switzerland are key drivers of demand for indirect real estate investments. Some pension funds are also increasing their real estate allocations at the expense of bonds (due to more attractive real returns). With the start of the capital increase season, real estate funds experienced a slight market correction. However, signs of recovery are already emerging. Further capital increases are set to follow in March, and UBS-Sima has announced a larger capital increase of CHF 350 million for the end of April. Dividend investments in April will further drive demand.

Equities

A positive trend has been observed in the performance of the international equity markets at the start of the new year, with European equities posting a better performance than US stocks for the first time in years. Media reports continue to focus on the latest measures of Donald Trump’s administration, including the introduction of special tariffs on aluminium and steel imports into the US. Despite Trump’s protectionist tendencies, European equity markets have demonstrated remarkable resilience, as European stocks are attractively valued after years of underperformance. Nevertheless, there are risks: Trump’s unpredictability could put an abrupt end to the rally through sudden shifts in trade policy. It also remains uncertain whether European companies can live up to operational expectations. Should growth fail to materialise, disappointments could follow. We therefore remain cautiously optimistic for equities, maintaining a defensive positioning with an overweight position in Swiss equities and high-quality global securities. We are also realising profits from our successful cybersecurity allocation and reinvesting these in broadly diversified global equities. Finally, we are maintaining our overweighting of US mid caps.

Commodities

The positive trend in gold prices persisted, as the precious metal continued to benefit from geopolitical uncertainty and extensive central bank purchases. Despite the strong performance, we are maintaining our neutral positioning, as gold can serve as a “safe haven” and provide the portfolio with protection against possible geopolitical escalations. On the whole, the commodity markets have also performed well recently, particularly precious metals, with all sectors posting gains. Despite ongoing volatility, we are maintaining our neutral weighting of commodities overall, as they offer important protection against inflation – a factor that could become more significant in the event of renewed inflationary pressures.

Private markets

Optimism for private market investments remains high. Private equity makes it possible to participate in the value creation of approximately 90% of all companies with an annual turnover of more than USD 100 million, which would otherwise be inaccessible to investors. Global buyout strategies that allow for active value creation appear particularly promising. The private debt market is continuing to expand worldwide, opening up new financing avenues. Senior secured loans with variable interest rates are very attractive, as they rank at the top of the capital structure, provide inflation protection and offer appealing returns. Both asset classes offer considerable diversification benefits as well as an attractive risk-return profile.

Digital assets

Despite the increased level of uncertainty following the US election, the market environment for digital assets continues to be positive on the whole. If global liquidity conditions remain stable or even improve, Bitcoin’s upward trend is likely to continue, supported by a continued robust demand profile. This outlook should also boost altcoins, although there are no clear signals of an imminent rally. A moderate overweight appears justified. We are therefore establishing a selective tactical position in Solana, as the upcoming token unlock on 1 March, valued at approximately USD 2 billion, appears likely to be largely priced in.

TAA Plus Balanced CHF

Contact a client advisor for more information.

^{This publication is intended for information and marketing purposes only, and is not geared to the conclusion of a contract. It only contains the market and investment commentaries of Maerki Baumann & Co. AG and an assessment of selected financial instruments. Consequently, this publication does not constitute investment advice or a specific individual investment recommendation, and is not an offer for the purchase or sale of investment instruments. Maerki Baumann & Co. AG does not provide legal or tax advice. In addition, Maerki Baumann & Co. AG accepts no liability whatsoever for the content of this document; in particular, it does not accept any liability for losses of any kind, whether direct, indirect or incidental, which may be incurred as a result of using the information contained in this document and/or arising from the risks inherent in the financial markets. Maerki Baumann & Co. AG holds a Swiss banking license issued by the Financial Market Supervisory Authority (FINMA).}

Editorial deadline: 25 February 2025

Maerki Baumann & Co. AG
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