Macquarie Asset Management is pleased to announce the publication of its Outlook 2025, providing perspectives on the themes set to influence the investment landscape and performance of key asset classes for the year ahead.

In Outlook 2025, “Plan for growth, prepare for volatility,” Macquarie Asset Management outlines its expectations that global growth will remain healthy, driven by the resilience of the developed world consumer. 2024 has been another year of strong returns for investors, with the classic 60/40 portfolio¹ returning 18.2% this year after delivering 13.3% in 2023.²

Key to this better return environment has been inflation developments, with headline inflation rates across the developed world nearing 2%, allowing central banks to normalise monetary policies. While conditions are constructive, we maintain our longer-term view that we have transitioned to a ‘new normal’ where neutral rates are likely to remain elevated relative to the past decade. At the same time, GDP growth has remained robust, with the US economy continuing its above-trend growth and the Euro area and UK economies seeing solid domestic demand and GDP growth after a challenging 2023.

Understanding the likelihood of structural changes in the global economy, driven by the trend towards de-globalization and geopolitical developments remains crucial, in our view, to successful investing over the next decade or more. Many of these factors will be in play next year, but short-term ‘return to normal’ dynamics are also likely to play an important role and will be crucial determinants of returns in 2025.

Ben Way, Group Head of Macquarie Asset Management, said: “This year’s Outlook report reflects our view that financial conditions will continue to normalise in 2025. The past year demonstrated the skill of policy makers in navigating the post COVID inflationary surge as well as the resilience of financial markets, leading to strong returns for investors in listed markets. Political challenges to incumbency and subsequent changes in governments and policy, combined with elevated geopolitical tensions globally, contrast with a more constructive outlook for the global economy in 2025.”

Global Real Estate: A beneficiary of falling interest rates and healthy growth

Real estate as an asset class has historically been highly sensitive to interest rates and is expected to be one of the sectors that benefits most from lower rates over the next 12-24 months. Furthermore, real estate returns generally correlate strongly with economic growth. Overall, the combination of lower interest rates and robust, possibly accelerating, global growth is likely to be particularly powerful for this asset class.

Infrastructure: Well-balanced between defensiveness and growth

Our data indicates that valuations may have stabilized, and we anticipate multiples to rise with declining interest rates. Strong GDP growth should boost earnings, leading to total returns of 11-12%, above the long-term average but consistent with past periods of falling interest rates and accelerating growth. It is worth noting that with particularly strong tailwinds behind data centres and financing conditions expected to improve in 2025, we believe the digital infrastructure sector is poised for an especially dynamic year ahead.

Listed Equities

Falling interest rates and robust GDP growth form a generally positive backdrop for global equity markets. However, we’ve seen equity market performance disconnect from macroeconomic fundamentals many times over the past few years, making it ever more important to assess markets granularly. While earnings multiples are elevated in certain pockets of the market, the equity risk premium currently sits comfortably at its long-term average, suggesting equity investors should still get rewarded for taking additional risk in this cycle. Despite higher interest rates making fixed income assets more attractive, global equities still offer many opportunities; and with policy expected to be volatile and geopolitical developments likely impacting returns, 2025 is a year where experienced and thoughtful active asset managers can add significant value for investors.

Global debt and credit markets: Central bank easing cycle to provide support

In the second half of 2024, bond markets improved materially as inflation moderated and central banks began normalising monetary policies. Looking ahead, since a substantial degree of central bank easing has already been factored into most rates markets and credit spreads have tightened, the potential for aggressive price gains is more limited, although absolute returns should still be healthy by historical standards.

Access Outlook 2025

To explore these insights and more in detail, please access the full report here.

About Macquarie Asset Management

Macquarie Asset Management is a global asset manager, integrated across public and private markets. Trusted by institutions, governments, foundations and individuals to manage approximately $US633.7 billion in assets, we provide a diverse range of investment solutions including real assets, real estate, credit and equities & multi-asset.

Macquarie Asset Management is part of Macquarie Group, a diversified financial group providing clients with asset management, finance, banking, advisory, and risk and capital solutions across debt, equity and commodities. Founded in 1969, Macquarie Group employs over 20,600 people in 34 markets and is listed on the Australian Securities Exchange.

All figures as at 30 September 2024.

Important Notices (Macquarie Asset Management): None of the entities noted in this media release is an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Commonwealth of Australia) and the obligations of these entities do not represent deposits or other liabilities of Macquarie Bank Limited ABN 46 008 583 542 (Macquarie Bank). Macquarie Bank does not guarantee or otherwise provide assurance in respect of the obligations of these entities. In addition, if this media release relates to an investment (a) each investor is subject to investment risk including possible delays in repayment and loss of income and principal invested and (b) none of Macquarie Bank or any other Macquarie Group company guarantees any particular rate of return on or the performance of the investment, nor do they guarantee repayment of capital in respect of the investment.

The performance quoted represents past performance and does not guarantee future results. Investing involves risk, including the possible loss of principal.

¹ Portfolio consisting of 60% equities (represented by S&P 500 Index) and 40% bonds (represented by 10-year US Treasuries).

² Based on Robert Shiller online data, through 1 November 2024.

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