With 2025 looming on the horizon, the global economy stands at the precipice of both uncertainty and opportunity. According to the Markets 360 team, the challenges facing the world economic situation are numerous, centering around what they refer to as "known unknowns." These range from the outcomes of geopolitical conflicts, such as those in the Middle East and Ukraine, to the anticipated policies of the incoming United States administration under President-elect Donald Trump.
Luigi Speranza, Chief Economist at Markets 360, emphasizes the potential consequences of Trump's economic approaches. "Our core assumption is... tariffs," he states, underlining his belief the president-elect will largely fulfill his campaign promises relating to foreign economic and trade policies—many of which might negatively impact the US economy. This perspective diverges from prevailing market sentiments which might be too optimistic about what Trump’s administration will decide.
The team anticipates not merely the continuation of current tariff levels but rather increases targeting China and possibly other global trade partners. While they project some level of economic boost due to deregulation and efficiency improvements, they caution against potential job losses and reduced productivity stemming from Trump's protectionist stance.
Nonetheless, the early signs for the US economy appear resilient, bolstered by what Speranza calls post-election “animal spirits.” These transient gains might overshadow forthcoming struggles, as the mixture of new tariff policies and economic protectionism is likely to push prices higher and restrict growth.
Such sweeping changes are expected to create ripple effects globally. For example, the eurozone is still grappling with fragile growth conditions, and increased protectionism originating from the US could hinder the region’s recovery. Speranza explains, “The European Central Bank is aware of these pressures and is expected to pursue swift measures to adjust its policy accordingly.” With inflation remaining stable so far, the ECB might chart the course for more neutral interest rates by the latter part of 2025. Meanwhile, he foresees Germany re-evaluing its fiscal policies, potentially resulting in increased spending for defense as the country reassesses its economic constraints.
On the other side of the globe, China’s response is similarly significant. The Markets 360 analysts predict China's authorities will likely roll out additional fiscal and monetary stimulus to counteract the shocks from US policy changes. Such measures are intended to sustain growth levels, though they may ironically contribute to global disinflation as they stimulate domestic capacity.
Emerging markets are not immune to these shifting tides. The response will differ across nations, especially those beginning from already weakened economic positions. Brazil and Colombia are named as particularly vulnerable to these effects, as tariffs may drastically impact their trade dynamics.
Risks abound: the Markets 360 team expresses concerns over fiscal sustainability, especially if growth rates fail to meet expectations. If inflation constraints stymie effective monetary policy responses, they warn of destabilizing feedback loops. Advanced economies could face similar vulnerabilities with their fiscal positions, illustrated recently by the widening spreads observed within France's market.
Each of these scenarios plays out against the backdrop of uncertainty surrounding US foreign policy and economic directives, hinting at possible upheavals. The path forward is far from clear, as the interplay between US tariffs, regional responses, and the global economy will shape the narrative heading toward 2025.
Overall, the Markets 360 team shows their adaptability and insight, noting the necessity for monitoring global markets as they respond to dynamic geopolitical realities. The culmination of these factors will significantly dictate the health and direction of the global economy as it heads toward the halfway mark of the decade.
