New Delhi [India], December 10 : JP Morgan outlines an optimistic yet complex global economic outlook for 2025, predicting a low likelihood of recession, estimating only a 15 per cent probability of an economic downturn in the first half of the year.
According to JP Morgan, the United States is expected to remain the primary growth driver, supported by a strong labor market, healthy credit fundamentals, and significant investments in artificial intelligence (AI).
Technological advancements in AI are anticipated to play a pivotal role in shaping markets, with an increased focus on monetization in the coming quarters.
Meanwhile, potential shifts in trade, fiscal, and energy policies under the new US administration could introduce elements of uncertainty.
Global growth is forecasted to slow from 2.7 per cent in 2024 to 2.2 per cent in 2025. Regional variations are evident, with US growth expected to decline to 2.0 per cent from 2.4 per cent, and China's growth projected to drop to 3.2 per cent from 4.8 per cent.
Inflation is also predicted to ease globally, with consumer price index (CPI) inflation reducing to 2.7 per cent from 3.0 per cent. However, disinflation processes are likely to vary across countries due to differing supply-demand imbalances.
Monetary policies across the globe are anticipated to become less synchronized. The US Federal Reserve is expected to cut interest rates by 100 basis points to 3.75 per cent, with the potential to pause earlier if needed.
The European Central Bank (ECB) is likely to lower rates below the neutral level of 1.75 per cent, while emerging markets are projected to experience slower rate normalization due to currency-related challenges.
JP Morgan advises a flexible investment approach to navigate the evolving landscape. In equities, the firm recommends overweight positions in India, the UAE, and Japan's banking sector, as well as in US industries like cybersecurity and data centres.
In bonds, it suggests opportunities in Euro area duration, Turkish government bonds, and Indian rupee duration. For commodities, long positions in gold and short positions in oil are highlighted, reflecting their respective resilience and weak supply-demand fundamentals.
Currencies and credit markets also present opportunities, with favourable positions in the Turkish lira and Israeli shekel and strong fundamentals in corporate credit.
JP Morgan emphasises that adaptability and a focus on idiosyncratic factors will be key to successfully navigating the complex and dynamic macroeconomic environment in 2025.
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