UK-headquartered banking group Standard Chartered and Edinburgh-based investment manager abrdn have just published their 2025 market outlook, outlining investment opportunities.

Despite uncertainties over policy shifts, abrdn is positive on US and developed markets equities in 2025, selective emerging markets, while real estate is upgraded for the third quarter in a row.

The firm said it has become more positive on developed market equities, with strong US earnings growth, and a likely broadening in tech and artificial intelligence winners, providing a basis for stock market performance. However, elevated US equity valuations bring risks, with the valuation gap between US and European stocks now at a record high. This keeps positioning sizing still relatively small.

Overall, abrdn is positive on corporate risk and the dollar, positive on real estate, and neutral on most fixed income markets, with divergence a key theme. The firm thinks that investors are better off taking diversified risk in financial markets, rather than sitting on cash.

A stronger dollar and global trade uncertainty are likely to be headwinds to emerging market debt, which has been downgraded. But abrdn stresses that there can be emerging market winners in the changing patterns of globalisation, with select opportunities especially among higher yielding countries in Latin America.

There are several risks to this outlook, including from US trade, immigration, and fiscal policy; Chinese growth and the stimulus response; and various political and geopolitical flashpoints. Further policy easing is likely in China so, despite headwinds, the firm is modestly positive on emerging market equities. In fact, some of the most vulnerable countries – such as Mexico and Vietnam – are also best placed to gain from reshoring if the US does pursue rapid decoupling from China, the firm said.

“Moving into 2025, there is significant uncertainty about the precise contours of the coming policy shifts under US president-elect Donald Trump,” Peter Branner, chief investment officer at abrdn, said. “There is a substantial risk that the Trump administration proves much more disruptive than we are expecting, both to the upside and downside in terms of economic and market outcomes. And there are scenarios in which Trump’s policy agenda proves even more supportive for growth and market sentiment,” he added.

Branner expects strong US GDP growth in 2025 driven by a cooling but still solid labour market and strong corporate profitability, and slightly stronger growth in 2026 boosted by tax cuts and deregulation.

Against this backdrop, he is positive on developed market equities as the outlook for US earnings growth remains strong, and he continues to upgrade his positive position on property as the market turns up from the bottom of the cycle. He is modestly positive on emerging markets in anticipation of more China stimulus and has identified opportunities in select emerging markets that can benefit from shifting patterns of globalisation.

Small caps
Forthcoming shifts in US policy bring uncertainty, but are likely to disproportionately benefit US firms, and small caps in particular, abrdn continued. The deregulation agenda pursued by the Trump administration is likely to see the US Federal Trade Commission make merger and acquisition activity easier, while relaxing bank capital regulations and granting more energy exploration permits. Corporate tax cuts will tend to benefit smaller companies most, while conversely tariffs will disproportionately hit internationally exposed firms.

Standard Chartered's chief investment office (CIO) also believes that Trump’s win has boosted US business confidence on expectations of tax cuts and deregulation, and increased protectionism from tariffs. The firm is overweight in equities and gold and thinks that the US is likely to be in the driver’s seat, outperforming other major markets, as business and consumer confidence is boosted following Trump’s election. Trump’s contentious policy agenda and China’s growth outlook are key risks.

Standard Chartered believes that Europe, China, Mexico and Canada face increased trade uncertainty as Trump imposes higher import tariffs as a starting point of negotiations to bring down US bilateral trade deficits. China, facing deflationary pressures, is likely to try and offset US import curbs with higher exports to non-US markets and increased stimulus to boost domestic demand. The euro area faces a greater challenge, given self-imposed constraints to expanding fiscal policy. Given this, Standard Chartered expects the European Central Bank to cut rates to 2 per cent by end-2025 to support growth as inflation cools.

“While it is important to keep abreast with global events and their impact on markets, it is even more important to focus on an investment plan. Be disciplined, stay invested and don’t try to time the market too much. Ensuring a good diversification in your portfolio, maintaining a foundation portfolio and regularly adding to it when opportunities arise, would help achieve your long-term financial and life goals,” Steve Brice, global chief investment officer at Standard Chartered said.

Other wealth managers, such as Northern Trust Asset Management, UBS Global Wealth Management, Pictet Asset Management and Goldman Sachs Asset Management, also favour US equities in 2025. See more commentary here and here.