By Samir Subberwal, Global Head of Wealth Solutions, Deposits and Mortgages, and Chief Client Officer, Wealth and Retail Banking, Standard Chartered
The new lunar year is upon us and traditionally the year of the wood snake heralds a period of transformation. As global markets evolve over the next 12 months, there are a number of themes investors will be forced to navigate, including the continued easing of global monetary policy as inflation moderates, a Chinese economy potentially requiring even more stimulus and of course the second Trump presidency in the United States.
The snake in the Chinese zodiac not only signifies transformation but also growth, introspection as well as intuition and intelligence. With a variety of likely policy and regulatory shifts in the United States and elsewhere, investors will certainly have to be intelligent and nimble this year, potentially repositioning portfolio allocations. If the first iteration of the Trump presidency acts as a litmus test, it is highly probable his next term in the White House will see significant challenges to the current status quo.
This is why we agree that the year will be transformative – just a like snake which regularly sheds its skin to unveil a fresher and shinier coat readying itself for opportunities and challenges ahead.
Our global Chief Investment Office (CIO), in its Outlook 2025 report “Playing your Trump card”, highlighted how investors can position themselves this year to capture market opportunities. From our point of view, the United States will be in the driver’s seat once again this year as business and consumer confidence get a boost following Trump’s election success. This provides a basis for our asset allocation strategy.
As investors globally continue to flock to alternative asset classes, like private credit for instance, we maintain the view that this year, a traditional and diversified investment mix is prudent.
Specifically, we expect global equities to outperform bonds and cash this year amid resilient economic growth led by the US and a potential recovery in China. We also see gold delivering another year of outperformance, playing its role as a safe haven and portfolio hedge amid geopolitical uncertainty. In 2024, gold had its best year in 14 years, outperforming even the US S&P500 equity index and setting new record highs. Sustained demand from Emerging Market central banks is likely to remain a key driver of gold prices; any inflation worries or falling bond yields would be a bonus.
Within equities, we’re looking for another year of American exceptionalism, with US equities outperforming on the back of strong earnings growth, fuelled by Trump’s business-friendly, pro-growth tax cut, deregulation and streamlined government policies. We expect these policies to mitigate risks of increased trade protectionism and tighter immigration. Central bank policy, though, could eventually matter more as the Fed likely cuts rates in the latter half of the year to help the US economy achieve a soft landing.
Looking more broadly at the global macro economy and markets, the key debate is how soon and how much Europe and China policymakers are willing to ease fiscal and monetary policies to revive domestic growth in the face of a more restrictive US trade policy. Potentially punitive import tariffs imposed by the Trump administration could be the trigger for further monetary and fiscal policy easing in China, with an aim of boosting domestic consumption.
In the rest of Asia, the Bank of Japan is likely to stand out as the only major central bank raising rates this year as rising wage growth revives inflation expectations after decades of deflation. The other Asian central banks are looking to cut rates as inflation subsides, although they may have to wait for clearer signals from the US to make sure that Trump’s policies are not reviving inflation. In Asia ex-Japan, we are overweight Indian equities. Although growth has recently softened and rate cut expectations have been dialled back, we are more confident about India’s long-term economic growth outlook and expect this to translate into continued earnings growth outperformance.
Nevertheless, we need to monitor risks closely, given the significant transformation we are likely to witness in the year of the snake. We are on the cusp of several pivotal events that could alter the economic, geopolitical, and financial market narratives. In the United States, President Trump’s first 100 days in office should provide greater clarity on his policy agenda. In China, policymakers are likely to provide further policy support measures that have the potential to revive growth. Finally, stronger US growth raises the risk of inflation, limiting the Fed’s headroom to continue cutting rates.
Against this backdrop, it always makes sense for investors to approach any period of transformation with a degree of prudence and portfolio diversification. Investment planning should not be all about capturing the opportunities. It is prudent that we are prepared for challenges and not get caught by any surprises. When advising our clients, we are guided by five key principles of investment planning: Staying invested, maintaining a diversified portfolio, focusing on time in market and not timing the market, balancing risk and return, and having protection against unexpected events.
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