Swiss private bank Union Bancaire Privée has just published it's Investment Outlook for 2025. It believes that the global economy has avoided recession for a second year, with disinflation dominating 2024.

The global economy has avoided a recession for a second year, with disinflation dominating investors’ focus in 2024, according to Swiss private bank Union Bancaire Privée.

However, challenges loom as economic growth becomes more fragmented, though resilience persists in certain areas, UPB said in a statement.

Donald Trump’s return to the presidency is expected to boost growth in the US, while in Asia, a broad recovery led by an upswing in the ASEAN region, alongside China’s policy support, signals opportunities for cautious investment heading into 2025. Europe faces a complex path, with key elections in Germany and potentially France, as nations seek consensus on Europe’s direction, the firm added.

Despite progress on inflation, wage and service inflation could resurface by late 2025, renewing fears of rising bond yields, emphasising the importance of active risk management. Geopolitical tensions also remain a significant factor, with defence companies and gold emerging as strategic investment options in this fragmented landscape. This outlook underscores the importance of prudent strategies for navigating the evolving global economy and preserving wealth into 2025, the firm said.

Global economic growth in 2024 is also expected to be resilient, driven primarily by the US, which should be able to avoid recession through strong consumer spending, technology investment, and fiscal stimulus. In 2025, world growth is projected to remain around 3.1 per cent, with US growth between 2 and 2.5 per cent, supported by pro-business policies under the new Trump administration. Growth outside the US will be more fragmented due to trade tensions, though Asia, with 3.8 per cent growth, will be a key driver, particularly India, with 6.5 per cent growth, and ASEAN countries.

China’s growth is set to stabilise at 4.7 per cent, though risks remain. In Europe, growth is expected to be limited, with the eurozone at 1 per cent and the UK at 1.6 per cent. Southern European countries such as Spain and Portugal will perform better than Germany and France, which will struggle with fiscal constraints, slow transitions to new growth sectors, and political instability. Inflation will vary.

Countries with strong growth, such as the US and UK, will face inflationary pressures, while France, Germany, and China may experience weak growth and deflation risks, the firm added. Fiscal policies will generally remain accommodative, with the US focusing on corporate aid and China employing fiscal stimulus to support recovery. The eurozone’s major spenders, France and Italy, will face fiscal tightening but could still address climate and technological challenges with EU funds. Geopolitical risks and growing economic divides between regions could influence the global economic trajectory in 2025.

Europe also faces another year of political uncertainty in 2025, with elections in Germany and potentially in France likely to shape the continent's economic and political trajectory, the firm added. Polarisation in major economies challenges Europe’s ability to adapt to 21st-century demands, as outlined in Mario Draghi's roadmap for competitiveness.

Amid this, Switzerland and Scandinavia stand out as resilient investment opportunities, driven by innovation and strong returns on equity. While Europe's core economies grapple with limited fiscal support, homegrown sectors such as defence show promise, and select financials and UK equities offer cyclical recovery prospects. For investors, 2025 presents a chance to navigate Europe's challenges by instead looking to Switzerland, Scandinavia, and defence for 21st-century growth, innovation and investment, and to financials and the UK for cyclical recovery prospects in the new year.

In late 2024, China’s policymakers began implementing shifts to address growing structural and cyclical challenges. Measures to inject capital into the banking system, totalling less than 1 per cent of GDP, fall short of previous large-scale efforts in China and other countries. It remains unclear whether China will follow its 1998 strategy of purging bad real-estate loans and focusing on commercial lending to drive growth.

As real estate reforms progress, China is aiming to boost consumer spending, though this remains a small step towards rebalancing its economy. The success of these efforts will depend on future policy steps and whether China takes bold action to fuel the next phase of growth.

With trade tensions potentially rising under President Trump’s return, capital-protected China equity exposure could help manage risks, while commodities such as copper and aluminium, and equities in Singapore and ASEAN countries may benefit from a more stable and growing China, the firm concluded.