Bank of America presented its projections for 2025, which give signs of optimism and strengthening in the US stock market, leveraged by economic growth and a slowdown in China’s GDP, but with fears about the behavior of oil and the uncertainty of the Federal Reserve’s decisions on monetary policy.
The attention of international markets will be on political changes, with the start of Donald Trump’s government, which will make decisions on tariffs, fiscal policy and other regulatory matters, which will not only impact the United States, but other countries.
“In 2024, growth surprised on the upside and inflation moved in the right direction, allowing central banks to begin to relax their policies, risk assets to perform well and global stocks to reach new highs,” said Candace Browning, director of Bank of America (BofA) Global Research.
The first prediction is tied to the S&P, an indicator that is expected to rise by more than 10% in the next year, and that its earnings growth will accelerate to 13% during 2025.
There is a positive prediction for the US economy, taking into account the expectation of productivity growth. The forecast is for the year-on-year GDP to be 2.4% for 2025 and 2.1% year-on-year for 2026.
“But as we approach 2025, political uncertainty has increased substantially. Many of the expected policy changes should be positive for US stocks, but much depends on their timing and how the rest of the world responds,” Browning added.
In this sense, they expect the Fed to cut its rates at least twice, achieving a minimum reduction of 25 basis points during the first half of the year. They could then be frozen, for an indefinite period of time.
BofA is betting on a positive yield on 10-year US Treasury bonds, which would have a return of between 4% and 4.5%.
But on the commodities side, there is a probability that demand for raw materials will weaken, while there is an excess in the supply of oil and cereals. However, gold would be one of the metals that would have a positive performance and “should reach a maximum of US$3,000 per ounce,” adds the forecast report.
Regarding the dollar, there are certain concerns, especially because “until the first half of 2025 the bullish drivers should diminish amid a less secure policy and growth outlook,” so there could be risks of depreciation.
The projections also have an eye on the international arena, and consider that emerging markets face short-term risks, since uncertainty about US policy will cause them to have certain “falls,” but this would generate interest in investors. They expect the scenario to improve when the dollar reaches its highest performance of the year.
Regarding China, BofA is betting on a weakening as a consequence of the tariff measures that would come with the new government. “China’s real GDP growth is expected to slow to 4.5% year-on-year in 2025 and the stimulus of domestic demand will offset any impact of tariffs with a lag,” the document adds.
Source: BankOfAmerica
