State Street Global Advisors, the asset management business of State Street Corporation (NYSE: STT), today launched its 2025 Global Market Outlook: Finding the Right Path, outlining its macroeconomic outlook and key investment themes for the year ahead.
Against the background of a resilient economic environment and major central banks embarking on an easing cycle in 2024, equity markets delivered strong returns, while fixed income markets saw modest returns. Looking ahead, State Street Global Advisors expects rate cuts and macroeconomic resilience to continue in 2025, and its long-standing forecast of a US soft landing to materialize.
Lori Heinel, Global Chief Investment Officer, commented: “2024 was no ordinary year, with elections around the world, persistent inflation and market volatility all playing their part in building an uncertain macroeconomic environment. Despite these challenges, markets continued to be resilient. As we enter 2025, we remain cautiously optimistic, with expectations of a soft-landing in the US looking set to translate into reality. While there are a range of uncertainties to contend with, investors may want to consider above target allocations to equities and should remain thoughtful about portfolio construction.”
State Street Global Advisors believes that the rate cut cycle that started in 2024 will continue for a while longer, although the Trump-led Republican US election victory could result in a change to the narrative in the latter part of 2025. Global geopolitical forces could also play their part in rupturing long-standing economic and financial ties.
State Street Global Advisors retains its favorable outlook for fixed income in 2025. It anticipates that slowing economic output and tame inflation will allow central banks to cut policy rates further, even though the pace and scale may be more uncertain with a Trump administration. This uncertainty may offer investors tactical opportunities to build or expand their duration positioning through the easing cycle.
Jennifer Bender, Global Chief Investment Strategist, said: “While spreads across both investment grade credit and high yield debt are near historic lows, we are optimistic about prospects for fixed income assets next year, and see a generally favourable environment for advanced economy sovereign debt. Market sentiment swings and volatility could potentially create opportunities for investors to manage or extend duration.”
Within global equity markets, the resilient economic backdrop provides support for earnings, particularly in the US. Outside the US, the picture is more nuanced but there are pockets of opportunities across markets. Investors will also need to navigate both short-term uncertainties as well as deeper structural shifts such as demographic changes, geoeconomic fragmentation, and the rise of transformative technologies.
Bender continued: “We expect Japanese equities to move sideways due to potential volatility, while Chinese equities may struggle in sustaining higher growth and strong performance despite the short-term relief from the country’s stimulus program. At the same time, we believe US large cap equity will maintain its structural advantage to the rest of developed markets and see the outlook for emerging markets as more nuanced as investors balance economic and earnings growth, and easing inflationary pressures versus geopolitical risk and a strong US dollar.”
Aside from the outlook for different asset classes, the firm also highlights important considerations in portfolio construction, the emergence of the Gulf Cooperation Council (GCC) region as an investment location worth greater consideration, and the disruptive power of transformative technologies such as generative AI and tokenizaton.
Heinel, added: “The GCC region is undergoing significant transformation driven by its Vision plans, which increases its appeal for both domestic and international investors and is reflected in the performance of the equity and bond markets. From the inclusion of GCC countries in global indices, to the region’s substantial fixed income issuance, the GCC region offers significant growth potential for investors seeking to build a forward-looking portfolio. In addition, we believe investors should look beyond the traditional balanced (“60/40”) portfolio and evaluate alternative exposures from a diversification, risk mitigation and alpha generation perspective. Allocations to real assets, commodities, infrastructure, digital assets and private assets could potentially offer higher returns, lower volatility and enhanced diversification.”
About State Street Global Advisors
For over four decades, State Street Global Advisors has served the world’s governments, institutions, and financial advisors. With a rigorous, risk-aware approach built on research, analysis, and market-tested experience, and as pioneers in index and ETF investing, we are always inventing new ways to invest. As a result, we have become the world’s fourth-largest asset manager* with US $4.73 trillion† under our care.
*Pensions & Investments Research Center, as of 12/31/23.
†This figure is presented as of September 30, 2024 and includes ETF AUM of $1,515.67 billion USD of which approximately $82.59 billion USD in gold assets with respect to SPDR products for which State Street Global Advisors Funds Distributors, LLC (SSGA FD) acts solely as the marketing agent. SSGA FD and State Street Global Advisors are affiliated. Please note all AUM is unaudited .
7395469.1.1.GBL.RTL
Expiration Date: Dec 31, 2025
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