As we approach the end of the year, it's becoming increasingly apparent that financial institutions are stepping forward with their projections and analyses for the upcoming yearsRecently, major firms such as UBS Wealth Management and Pictet Asset Management have unveiled their investment outlooks for 2025, emphasizing the potential impacts on the global economy.

These institutions uniformly believe that their essential strategies will create favorable conditions for the American economyBoth UBS and Pictet express optimism about the future of artificial intelligence and the finance sectorNotably, despite recent fluctuations in the markets, a prevailing sense of optimism about economic development in the coming year appears to be firmly established.

UBS Wealth Management identifies AI as one of the most crucial investment themes of recent years, alongside promising opportunities in gold investments.

In a discussion led by Hu Yifan, the Chief Investment Officer for Greater China and Head of Macroeconomics for the Asia-Pacific region at UBS, the future of both the global and Chinese markets were explored in depth

Hu pointed out that 2024 is expected to be strong for both equities and bondsTo date, the American economy has shown remarkable growth since 2020, with an increase of 34% and a stock market that has surged by 81%. Notably, 2023 has witnessed a continuous unexpected performance from the U.Seconomy, with projections indicating growth rates could reach as high as 2.8%, significantly surpassing the potential growth rate of 1.5% to 2%. This positive trend has shifted discussions from concerns over a 'hard landing' or 'soft landing' to an emerging viewpoint of a 'no landing' scenario.

Looking forward to 2025, Hu Yifan highlighted three major trends that are capturing attention:

The first is the impact of policy changesHe emphasized a core set of policy measures including tax cuts, deregulation, interest rate reductions, and expanded investments, which he asserts will provide short-term benefits to the U.S

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economyHowever, he cautioned that these policies might be offset by increased tariffs.

Secondly, the technological wave driven by artificial intelligence is garnering significant attentionHu drew parallels between today's AI revolution and the steam revolution from a century prior, noting that just as steam technology minimized physical distances, AI is shortening time-based distancesThe growth potential within the AI sector is vast, ranging from infrastructural developments like cloud services and data centers to intelligent applications in software, media, and text generationInvestment in AI is projected to surge from $22 billion in 2024 to $26.7 billion in 2025, propelling rapid advancements in the global semiconductor industry and related fields.

Lastly, global monetary policy and geopolitical dynamics remain crucial considerationsAs the world enters a cycle of interest rate reductions, a more accommodative monetary environment is anticipated

The continued decline in inflation rates within the U.S., with overall inflation reduced to 2.7% and core measures trending downward towards the Federal Reserve's 2% target, reinforces this stance—though there may be risks of inflationary rebounds due to tariff policies, the probability of a severe inflation crisis seems minimal.

In light of these insights, Hu Yifan provided specific perspectives on asset allocation moving forward.

Regarding equities, he suggested that the backdrop of global growth and declining interest rates lends itself to ample growth opportunities, particularly in the U.Smarkets, while emerging markets—especially in the Asia-Pacific region—are also becoming increasingly attractiveThe financial sector is poised for growth in the wake of deregulation and a merger & acquisition wave.

In terms of fixed income, the trend of declining interest rates opens up favorable investment opportunities in fixed-return products, maintaining an appealing yield outlook.

On the currency front, he noted that the dollar index is currently adjusting from an overvalued status, and currencies such as the euro, pound, Swiss franc, and Australian dollar are likely to appreciate modestly.

With regards to commodities, Hu Yifan asserted that gold continues to represent long-term value for investors, predicting that gold prices may reach $2,900 by the end of 2025, highlighting the ongoing bullish outlook on gold

Furthermore, the transition to greener energy solutions is expected to stimulate demand for various metals, benefiting mining companies engaged in rare metals as well.

All in all, the broader global economic context in 2025 is poised to exhibit a positive trajectory, with the stock and commodity markets revealing significant investment opportunities, further influenced by the rapid technological advancements powered by AI and shifting global policy landscapes.

Turning to Pictet Asset Management, they similarly reaffirm optimism about the role of artificial intelligence alongside emerging opportunities in banking and real estate.

2025 is anticipated to serve as a pivotal year for global strategic transformation and the evolution of AI technologiesHistorical data suggests that the second year of market cycles tends to yield positive outcomesOver the past two decades, the following year's S&P 500 index has averaged a 23% increase, while the Nasdaq index has seen nearly 29% growth

This pattern is largely attributed to the clarity of policy directives, guiding market expectations towards future trajectories.

Among the recommended policies are corporate tax reductions, tariffs on foreign goods, deregulation frameworks, and improvements in governmental efficacyAnalyzing the concrete impacts reveals that tax cuts and deregulation drive positive incentives for corporate profitability, although tariff policies could negatively impact certain importing enterprisesOverall, the consensus points towards a moderately positive outlook on policy predictability.

Additionally, the government's fiscal team has introduced a "3-3-3" initiative, aiming to cap fiscal deficits within 3% of GDP, achieve a yearly growth rate of 3%, and elevate daily oil production to 3 million barrelsThis framework is indicative of a commitment towards commercial viability while maintaining a measure of fiscal equilibrium.

Based on these assessments, Pictet's senior multi-asset investment manager, Guo Shaoyu, anticipates that equities will outperform bonds in the foreseeable future, particularly by identifying opportunities in sectors such as AI and semiconductors, both of which retain significant growth potential

A prime example stresses that as AI technology evolves into new application phases, such as the widespread use of AI agents, these sectors will continue to reap benefitsThe rising demand for electricity driven by the proliferation of AI, in conjunction with economic recovery, will further bolster this segment.

Furthermore, the banking sector could experience heightened merger and acquisition activity as regulatory pressures are eased, expanding interest margin gainsThe real estate market may also flourish under declining interest rate conditions, while instruments like Real Estate Investment Trusts (REITs) may find renewed opportunities.

On the contrary, the lower interest rates cycle initiated in 2024 lays the groundwork for future investment strategiesHistorical observations from the six interest rate reduction cycles undertaken by the Federal Reserve since 1989 show that both equities and bonds achieved positive returns, with equities particularly excelling.

Guo hypothesizes a greater likelihood of a soft landing for the global economy, suggesting it can avoid outright recession while maintaining modest growth.

In this context, their 2025 strategy will focus on bonds and utilities, as traditional long-duration yield assets may reclaim favor in a declining interest rate environment

In the financial sector, lower rates will expand lending opportunities and reduce financing costs, catalyzing banking growth.

Pictet is also attentive to the rotation of small and mid-cap equities, where the declining rates and improvements in valuation will create a friendlier operational environment for smaller enterprisesEncourageingly, an uptick in business registrations in the American Midwest indicates emerging potential within specific regions.

When looking into asset allocation, Guo advocates for continually integrating macro trends with current market conditions to adjust strategies adeptlyIn 2025, Pictet Asset Management intends to embody the following principles:

Firstly, a combination of top-down and bottom-up approaches, relying on overarching trends while being selective about high-quality investments—including equities, bonds, alternative assets, and cash.

Secondly, adopting a dynamic adjustment methodology that emphasizes swift responses to market changes, as demonstrated through the capital shifts and policy responses during the pandemic of 2020.