Chicago-headquartered Northern Trust Asset Management has just released its 2025 Global Investment Outlook.

Northern Trust Asset Management (NTAM), a global investment management firm with $1.3 trillion in assets under management, expects strong earnings and healthy sales' growth to support US stock outperformance in 2025. A view echoed by other wealth managers.

NTAM believes that softer but continued US economic growth will translate into healthy earnings and revenue growth. It is also constructive on small cap equities, which will likely benefit from lower interest rates as about half of small cap debt is floating interest rate.

“In multi-asset portfolios, we maintain a preference for equities over fixed income. We expect US equities to benefit from an economic soft landing and healthier corporate profits than most other regions,” NTAM chief investment officer of global asset allocation Anwiti Bahuguna, said. “In 2025, we expect more modest gains for 60/40 portfolios with US equities leading the charge again.” 

Zurich-headquartered UBS Global Wealth Management also believes that 2025 should bring further upside for stock markets, with US equities being the preferred market for the firm. Goldman Sachs Asset Management and Pictet Asset Management, also favour US equities in 2025 due to strong earnings and “Trumponomics.” See more commentary here, here and here.

“Within fixed income, we continue to favour high yield bonds because of elevated yields, strong fundamentals and a supportive market backdrop,” NTAM chief investment officer of global fixed income Christian Roth said. “Credit ratings upgrades are outpacing downgrades, and the overall credit quality of the high yield market remains historically high.”

Money market funds also remain an attractive alternative for Northern Trust AM compared with other cash management options such as deposits or Treasury bills, even as the US Federal Reserve has started to cut rates. It sees little chance of money market rates returning to near-zero. The Bank of England, with concerns over inflation, will likely cut rates at a slower pace than the European Central Bank, while the firm expects Japan to increase its policy rate slowly.

While US inflation is likely to settle into a range above the US Federal Reserve's target of 2 per cent for 2025, the firm expects the path to be bumpy. It believes that Treasury Inflation-Protected Securities (TIPS) are an important defensive portfolio component for unanticipated inflation.

Northern Trust AM also believes that private credit has room to grow, supported by the shift of lending from traditional capital providers to private credit asset managers, while lower interest rates could potentially encourage more mergers and acquisitions in 2025.

Global economic outlook
In the US, NTAM’s base case economic outlook for 2025 is a soft landing. It expects economic growth to settle slightly below 2024 levels, inflation to ease further towards 2 per cent and the US Federal Reserve to proceed gradually cutting rates. However, NTAM sees two risk cases from the economic effects of policy initiatives of the incoming administration of US president-elect Donald Trump: reflation and supply restraint. In both cases, the net effect of restrictive immigration, higher tariffs, income tax cuts and deregulation could create economic conditions that disrupt the current soft-landing path.

In Europe, the economic picture straddles growth and contraction. A resilient labour force and target-level inflation is coupled with manufacturing sector contraction and risks of further geopolitical tensions and trade barriers. In the UK, NTAM expects the Bank of England to maintain a gradual and cautious approach to further interest rate cuts.

In Asia, while the overall optics are for favourable growth, the outlook for China remains a central concern, with economic growth falling short of the government’s 5 per cent target. A slowing economy is deepening a deflationary loop, with consumer price inflation slightly above zero and producer prices deep into deflation. Japan’s economic growth in 2024 was unspectacular, but wage gains that may support consumer spending are spreading across the economy and those gains may continue into 2025, NTAM said. See more on the outlook for China here.