Outlook for 2025: How about no landing?

Outlook for 2025: How about no landing? by Kirsten Boldarin, Head of Distribution – Wholesale

Article written by Kirsten Boldarin, Head of Distribution – Wholesale

For much of the past few years, there has been an ongoing debate about whether the US was going to experience a ‘hard landing’ or a ‘soft landing’. Back in the tail end of 2023, the mainstream view was an eventual ‘hard landing’ – the economy under pressure from elevated levels of inflation would be forced into a recession, borne down by the weight of the rate hikes necessary to curb that inflation.

Then, as inflationary pressures eased, the consensus narrative shifted to a ‘soft landing’ – a slowing economy but not a hard recession, more like a bumpy touchdown. And yet, the US economy continued to surprise with its resiliency to the point now where ‘no landing’ now seems plausible. The Fed has cut interest rates and US growth is running at a nominal rate of almost 5%. Throw in the prospect of Trump tax cuts and deregulation plus a boom in AI induced productivity and it is no wonder that equity markets were off to the races in 2024. 

The US has always been the focal point of geopolitical or market discussion, but it soaks up even more of our attention today because of its dominance. Going back a decade, the US equity market was less than half the weight of the MSCI All Country World Index, today it is more than two thirds of it. The US Dollar has also been in the ascendancy. The Fed’s calculation of a trade-weighted Dollar basket shows it has gained 40% over the last decade. The market has always focused on the US economy, but it will do so even more today because of its centrality, and this is why much of our discussion below is so US oriented.