U.S. investors are preparing for a swathe of changes in 2025, from tariffs and deregulation to tax policy, that will ripple through markets as President-elect Donald Trump returns to the White House, putting the focus on whether the U.S. economy can continue to outperform. The changing of the guard in Washington has big implications for how stocks, bonds and currencies fare in the new year and may require investors to rejig portfolios.
Forecasts call for another buoyant year for stocks, the dollar to maintain its recent strength over the coming months and Treasury yields to march higher. Investors largely expect U.S. economic exceptionalism to persist in the new year, as robust consumer spending and a resilient labor market put U.S. growth on a firmer footing than that of many of its developed market peers. The U.S. economy is expected to find further support from any potential tax reform, including a reduction in the corporate tax rate. Such tax cuts - which would need to pass Congress - could support company earnings and sentiment on stocks. In contrast, although the euro-zone economy grew faster than anticipated in the third quarter, its outlook remains weak due to potential large tariffs from the Trump administration, escalating trade tensions with China and low consumer confidence. After a bumpy week for stocks, Wall Street's main indexes ended Friday with gains after cooler-than-expected inflation data eased worries about the path of interest rates. 'We do expect U.S. growth to outperform the rest of the world in 2025, on the back of potentially favorable monetary and fiscal policy,' said Sonu Varghese, global macro strategist at Carson Group. Front and center for investors in 2025 is how rapidly or deeply the U.S. Federal Reserve can cut rate