Global scenario and forecasts for the first quarter of 2025

Despite the initial pessimistic forecasts, the outcome within the macroeconomic context in 2024 was more positive than expected. Many analysts had predicted a significant slowdown in the global economy, with Europe characterised by stagnation and a likely recession in the US.

Inflation, although lower than in previous years, remains a constant, fuelling uncertainties about the future actions of central banks.

Moreover, the slowdown of the real estate sector in China, with domestic demand lower than expected and a fragile geopolitical environment, has led to more cautious forecasts.

The US, with a solid labor market and resilient consumer spending, is expected to continue outperforming the Eurozone. However, uncertainties remain regarding the fiscal policy of the new administration and the Federal Reserve, which could increase volatility.

Nevertheless, Europe remains fragile due to political uncertainties and high energy costs, with the ECB aiming for monetary easing to support the recovery.

Following the strong rally in the financial markets in 2024, primarily driven by the technology sector and AI, 2025 is likely to face a slowdown in the profits of major tech companies, with potential expansion into other sectors.

In Europe, index performance was mixed. The DAX reached new record highs, while the CAC 40 closed lower, impacted by the economic slowdown and political instability. The Euro Stoxx 50, conversely, was notably penalised by lower exposure to the rapidly-growing technology sectors, closing with disappointing performance compared to US indexes, where uncertainty over Fed policy led to fluctuations in Treasury yields. Indeed, interest rate expectations changed several times during the year, reflecting conflicting economic data. In Europe, the ECB's path was more predictable, with a cautious approach that helped limit fluctuations in yields.

Despite the initial uncertainties, 2024 was characterised by a resilient global economy. However, new key factors are set to shape 2025:

• US elections: A possible return to trade protectionism and tax cuts, with a significant impact on the public deficit.
• Monetary policy: The Fed is adopting a more restrictive approach, reducing the likelihood of rate cuts in the short-term, which may negatively affect the bond market. The ECB, on the other hand, has maintained a more predictable path of monetary easing to support growth.
• Inflation: In the US, inflation remains elevated due to the housing sector, driven by rising rents and home prices, thereby slowing the disinflation process. In Europe, however, inflation is more balanced between goods and services, but this also means it may be more persistent over time.

To sum up: 2025 begins with many uncertainties, but with no signs of an imminent recession. Upcoming global geopolitical developments, along with varying monetary and fiscal policies, will be key factors in shaping market trends.