Raphaël Gallardo, chief economist and Kevin Thozet, a member of the investment committee at Paris-based asset manager Carmignac, discuss the global economic and investment outlook for 2025.  

Although many wealth managers have come out in favour of US equities in 2025, at a media event this week Carmignac highlighted that it is starting to re-engage with Europe and is slightly overweight in European equities.

Kevin Thozet emphasised how global equity markets have been quick to price further US exceptionalism post-election, while European and emerging market equities have been stuck at the low end of their historical valuation ranges.

“US firms are at the top of their game,” Thozet said on Wednesday. “There is a big valuation difference. European stocks are cheap. US firms are exceptional but so are valuations. There are opportunities in European assets which can act as a great diversifier...We favour sectors in Europe that are not exposed to the economy, such as the aerospace industry and luxury goods.” 

“An over-pessimistic sentiment towards European assets means that some great quality assets can be bought at discount compared to their American peers. And in the rest of the world, a selection of “Trump friends” also enables us to step foot in overlooked assets,” he said.

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

Thozet believes that markets will be volatile next year. Geopolitical fragmentation and national populist upheavals will continue the disruption of the trade and financial order.

In fixed income, Thozet favours attractively yielding corporate debt and inflation linked bonds, and stays shy of French spreads. He prefers short-term investment grade corporates and high-yield bonds with a favourable technical backdrop over developed market sovereign bonds which, despite circumstances, offer a meagre yield.

Economic outlook
Raphaël Gallardo drew attention to how the French budget crisis sanctions 25 years of failure of the mutual fiscal surveillance mechanism, which is a vital condition for a sustainable currency union. The ungovernability of the country means that it cannot be bailed out, even temporarily, by the safeguards created after the Greek crisis. “The US enjoyed the privilege of issuing the currency reserve, France was a freerider of the euro construct. But while the US is indebted in its own currency and can monetise its military right, France cannot deflate its debt or devalue its currency,” Gallardo said. He emphasised that France’s failure to enforce fiscal prudence will be a threat to the eurozone area.

Alex Everett, investment manager in the abrdn rates team, also highlighted how it has been a significant week for France, with volatility likely to remain elevated into year end: “We are pessimistic on the outlook for the French deficit and, on balance, expect spreads to widen by a further 10 to 20 basis points into year end.” 

In the US, Gallardo expects aggressive immigration curbs and the use of tariff threats to create a recessive effect on investment. Gallardo also highlighted how China is on the verge of debt deflation; he is not holding his breath for the next round of stimulus measures having a big impact.

Mark Haefele, chief investment officer at Switzerland's UBS Global Wealth Management also remains neutral on Chinese equities, saying that they look susceptible to tariff-induced volatility and stimulus disappointments. See more commentary here.