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2025 Investment Outlook

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2025 OUTLOOK

Economic outlook: Global growth dependent on a resilient U.S.

The world economy remains a mix of leaders and laggards. As inflation eases and central banks cut interest rates, the United States and India continue to drive global economic activity while Europe and China seek to kickstart growth. Here's what to watch for in the months and years to come.

LOOK AHEAD

Healthy U.S. economy remains a cornerstone of global growth

Displayed in a four-quadrant chart are the economic conditions of various countries and their position in the global economy. There are two axes. The horizontal axis is labeled near-term headwinds at the far left and near-term tailwinds at the far right. The vertical axis is labeled long-term tailwinds at the top and long-term headwinds at the bottom. Circles to the top or bottom of the horizontal axis or to the left or right of the vertical axis represent countries. The United States, India and Japan are positioned for resilient growth and near-term tailwinds in the top right quadrant. In contrast, China is in the lower left quadrant indicating fragile growth and near-term headwinds. Canada and the United Kingdom fall between long-term headwinds and near-term tailwinds in the lower right quadrant, with the European Union straddling the line between long-term tailwinds and long-term headwinds near the center of the chart. Australia, Mexico and Brazil are all in the upper left quadrant signifying long-term tailwinds and near-term headwinds.

Sources: Capital Group. Country positions are forward-looking estimates by Capital Group economists as of December 2024 and include a mix of quantitative and qualitative characteristics (in USD). Long-term tailwinds and headwinds are based on structural factors such as debt, demographics and innovation. Near-term tailwinds and headwinds are based on cyclical factors such as labor, housing, spending, investment and financial stability. Circles represent individual economies. Circle sizes approximate the relative value of each economy and are used for illustrative purposes only.

2025 Outlook webinar

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Welcome to the Benjamin Button economy

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U.S. public debt: Where is the breaking point?

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China stimulus - Game changer?

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EQUITY OPPORTUNITIES

Stock market outlook: AI leads a broadening market

Artificial intelligence is transforming the economy and driving opportunity across tech, industrials and other sectors, but with valuations elevated and market participation broadening, investors may want to consider less-recognized opportunities among small-cap companies and dividend payers.

TAKE STOCK

"Capital expenditure sprees are a feature, not a bug, of technological change."

- Jared Franz, U.S. Economist

Capital expenditure sprees are a feature, not a bug, of technological change," says U.S. economist Jared Franz

5 growth themes for the next five years

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AI spending spree: Where’s the payoff and what’s next?

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Granolas: The equity giants that offer non-tech exposure

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3 reasons utilities could be the next growth sector

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Fixed income outlook: Resilient U.S. provides an anchor

The backdrop for fixed income next year remains strong despite elevated interest rates and higher volatility in the near term. Explore the segments of the bond market where our fixed income investment team finds value.

FIND VALUE

Strong economy could lead to elevated interest rates

A line chart represents the path of the federal funds rate between 2022 and 2026. Specifically, it reflects the upper bound of the Federal Open Markets Committee's (FOMC) target range for overnight lending among U.S. banks. Between January 2022 and July 2023, the rate rose steadily from 0.25% to 5.50%. As of November 2024, it stood at 4.75%. The Fed's projection for rates then slowly declines, with a rate of 3.79% expected by December 31, 2025. The Fed’s median projection between January and December of 2025 and January 2026 is for rates to fall from 4.40% to 3.40%.

Sources: Capital Group, Bloomberg, Federal Reserve. Fed funds target rate reflects the upper bound of the Federal Open Markets Committee’s (FOMC) target range for overnight lending among U.S. banks. Median Fed projections are as of September 18, 2024. Latest data available as of November 30, 2024.

How bonds could shine as interest rates decline

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The macro landscape and implications for core fixed income portfolios

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Municipal bonds remain attractive despite fading stimulus

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Why the yield curve steepener should have more room to run

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