Our multi-asset investment views - January 2025
We remain positive on equities as they continue to be supported by healthy earnings growth. Find out more about our views on a range of asset classes here.
Autheurs
🟢 Long / positive
🟡 Neutral
🔴 Short / negative
🔼 Up from last month
🔽 Down from last month
Main Asset Classes
🟢 Equities
We remain positive as equities continue to be supported by healthy earnings growth. Recession risks also remain low and there is potential for AI-driven productivity gains.
🟡 Government bonds
Whilst valuations are attractive, we have decided to remain neutral given the low risk of recession in the US and the potential inflationary impact of Trump’s policy agenda.
🟡 Commodities
We remain neutral. Energy markets are expected to move into surplus in 2025 whilst weak global manufacturing data undermines demand for industrial metals. However, we remain positive on gold due to central bank demand.
🟢 Corporate bonds (credit)
We retain our positive view on credit, with a continued focus on European high yield as a source of income.
Equities
🟢 US
We maintain our positive view on US equities as the earnings outlook remains robust and recession risks are low. We continue to diversify via US financials where reported earnings have so far exceeded analyst expectations with strong growth.
🟡 UK
We remain neutral on UK equities. Although valuations are attractive compared to some other markets, the UK government’s recent budget has undermined business confidence, resulting in a weaker growth outlook.
🟢 Europe ex UK
We remain positive, particularly with regard to large cap stocks. Although political uncertainty in Europe remains high, it is largely priced in by markets. With many risks already accounted for, there is significant room for upside surprises.
🟡 Japan
Although Japanese equities benefit from strong earnings growth and corporate reform, we remain cautious as we await further announcements from the Bank of Japan (BoJ) on monetary policy normalisation.
🟡 Global Emerging Markets1
For now, we remain neutral. We recognise market headwinds such as the halt of the easing cycle by the Federal Reserve (Fed), a stronger dollar, and trade tariffs. However, if tariffs are milder than expected or further stimulus is announced by China, emerging markets could rally.
🟡 Asia ex-Japan: China
We maintain a neutral position. Although China is expected to bear the brunt of Trump-instigated trade tariffs, milder tariffs or further fiscal support from the People’s Bank of China (PBoC) present risks to the upside.
🟡 EM Asia ex China
We remain neutral. If the weak export cycle continues this will negatively impact markets such as Taiwan and South Korea. The latter is also battling with political instability and a poor domestic economy. Meanwhile, India has seen a derating in equity valuations.
1Global Emerging Markets includes Central and Eastern Europe, Latin America, and Asia.
Government bonds
🟡 US
We are neutral as although US rate cut expectations have moved closer to our forecast of one rate cut in 2025, concerns remain over inflationary pressures and the sustainability of government debt levels.
🟡 UK
We retain our neutral view. UK gilt yields reached their highest levels since the early 2000s during the recent bond selloff. This rise in borrowing costs may mean fiscal consolidation is necessary to prevent the government from breaching its £9.9 billion spending buffer.
🟡 Europe
We maintain a neutral stance. Although European bonds should benefit from the European Central Bank’s (ECB) initiatives to normalise rates amid easing inflation and a moderating labour market environment, this is already largely reflected in the price.
🟡 Japan
We remain neutral as we await more clarity on the BoJ’s plan to continue with the normalisation of monetary policy.
🟡 US inflation-linked bonds
We remain neutral. Although US inflation-linked securities can help offset any inflation surprises, the Fed’s pivot in December suggests monetary policy will be in line with, rather than behind, inflation expectations.
🟡 Emerging markets local currency bonds
We remain neutral on EM local bonds.
Investment grade credit
🔴 US
Valuations continue to hover around extreme levels, and despite an improvement in market liquidity, US IG remains vulnerable due to its long duration and sensitivity to rate fluctuations. We therefore retain our negative view.
🟡 Europe
We remain neutral. Valuations are more attractive in EU IG compared to the US and rate cuts continue to support the floating rate nature of the European economy.
🟡 Emerging markets USD
Our view remains unchanged as we recognise that the sector offers greater value compared to developed markets.
High yield bonds (non-investment grade)
🟡 US
We remain neutral as spreads (the difference in yields) are tight in the sector and we are becoming concerned that higher rate volatility will disrupt demand.
🟢 Europe
We maintain a positive outlook on European HY where valuations are more attractive compared to the US and there is less risk of overheating.
Commodities
🔴🔽 Energy
We have downgraded to negative as forecasts for 2025 supply and demand are predicting a significant surplus in the market.
🟢 Gold
We remain positive on gold. The trend of central bank purchasing was given a renewed push as the PBoC resumed buying after a six-month hiatus.
🟡 Industrial metals
A lack of infrastructure stimulus from the PBoC, compounded by weak manufacturing data globally, leads us to remain neutral.
🟡 Agriculture
We remain neutral as although rebalancing may provide some short-term support for agriculture indices, the market appears to be in a steady state with supply plentiful.
Currencies
🟢 US $
We remain positive on the US dollar.
🟡 UK £
For now, we remain neutral. Although sterling performed well in 2024, a poorly received budget and tax rises have hit business confidence. A renewed sell-off in gilts and UK stocks may continue to affect the pound.
🟡 EU €
We remain neutral on the euro which has repriced versus the US dollar over the last few months.
🔴 CNH ¥
Our view on the renminbi remains negative. We expect both stimulus and currency depreciation will be necessary to negate the downtrend in growth and the impact of tariffs.
🟡 JPY ¥
Our view on the yen is neutral. The currency is at historic low levels and stands to benefit if or when the BoJ decides to hike rates.
🟡Swiss franc ₣
We remain neutral as despite the risk of depreciation, we believe the currency is supported by its safe-haven status in a volatile environment.
Source: Schroders, January 2025. The views for equities, government bonds and commodities are based on return relative to cash in local currency. The views for corporate bonds and high yield are based on credit spreads (i.e., duration-hedged). The views for currencies are relative to the US dollar, apart from the US dollar which is relative to a trade-weighted basket.
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