NEW YORK, New YorkN.Y. – While we await key details on policy changes in the U SUS, indications thus far suggest the outlook for 2025 could present big opportunities for investors. The U SUS economy is on strong footing, with growing signs of a pickup in productivity growth as we head into the new year. In their newly released outlook for 2025, B of ABofA Global Research economists and strategists expect U SUS economic and earnings growth to outpace that of other developed economies, while U SUS equities should start the year off strong and end 2025 with the S and P five hundredS&P 500 at 6666. Policy changes, including tariffs, tax policy, and the regulatory environment, should have almost as much impact on the rest of the world as they will for the U SUS. As the year progresses, international opportunities should present themselves: European stocks are forecasted to slow but rebound to current levels by year-end 2025, and in China, domestic stimulus measures should offset any slowdown brought on by changes to trade policies.

“In 2024, growth surprised to the upside and inflation moved in the right direction, allowing central banks to start easing, risk assets to perform well, and global equities to reach new highs,” said Candace Browning, head of B of ABofA Global Research. “But as we head into 2025, policy uncertainty has increased substantially. Many of the expected policy shifts should be positive for U SUS equities, but a lot depends on their timing and how the rest of the world responds.”

Key macro calls made for the markets and economy in the year ahead are:

1. Further upside for the S and PS&P and it could come quickly: Head of U SUS Equity Strategy Savita Subramanian expects more than ten percent10% upward potential for the S and PS&P and earnings growth to accelerate to thirteen percent13% in 2025.
2. Improved U SUS productivity should help economic growth, but policy changes should play a critical role for U SUS and rest of world: Senior U SUS economist Aditya Bhave estimates U SUS G D PGDP growth to come in at two point four percent2.4% year-over-year (year over yearyoy) in 2025 and two point one percent2.1% year over yearyoy in 2026, which is above consensus partly due to improved productivity. A new mix of fiscal policies may be more supportive of U SUS economic growth vs the rest of the world.
3. Fed expected to cut twice before pausing; U SUS bond yields should remain in a tight range: In 2025, Bhave and team expect the Federal Reserve to cut interest rates by 25 basis points at its March and June meetings and then pause. Mark Cabana, head of U SUS Rates Strategy, expects a relatively tight trading range for the U S ten yearUS 10-year Treasury yield, around four to four point five percent4-4.5%.
4. Key commodity prices, including oil, expected to soften: Francisco Blanch, head of Commodities and Derivatives Research, expects commodity demand growth to weaken, particularly on raw materials. Macro fundamentals suggest markets in 2025 will be oversupplied for oil and grains but more finely balanced for metals. After facing headwinds early in the year, gold should peak at three thousand dollars$3,000 per ounce.
5. U S DUSD strength through the first half of 20251H25 but then growth concerns lead to depreciation: Alex Cohen, senior F XFX strategist, expects the U SUS Dollar to remain strong into the first half of 2025, around which time upside drivers should wane amid a less certain policy and growth outlook.
6. Emerging Markets assets face a short-term risk, then likely improvement: Head of Global Emerging Markets Fixed Income Strategy David Hauner says that uncertainty about U SUS policy is likely to send emerging markets lower, but investors may find a buying opportunity once there is more clarity on trade policy, especially if the U SUS dollar peaks.
7. U SUS Cyclicals should outperform: Subramanian expects cyclical strength in 2025 for a variety of reasons, including the Republican sweep, productivity cycle, decades of underspending in manufacturing and light positioning in cyclicals.
8. Demand for credit remains exceptionally strong: Our Credit Research team expects strong positive total returns for credit in developed markets next year, the third year in a row of strong performance.
9. Expect Chinese growth to weaken but easing to offset tariff impact: Helen Qiao, greater chief China economist and head of Asia Economics, expects real G D PGDP growth for China to decelerate to four point five percent4.5% year over yearyoy in 2025 and domestic demand stimulus to offset any impact from tariffs with a lag.
10. Euro area equity market to see downside through mid-year, then a recovery. Sebastian Raedler, head of European Equity Strategy, expects seven percent7% downside to the Stoxx 600 followed by a recovery close to current levels.

BofA Global Research

The B of ABofA Global Research franchise covers approximately 3,500 stocks and 1,250 credits globally and ranks in the top tier in many external surveys. Most recently, the group was named Number twoNo. 2 Global Research Firm of 2023 by Institutional Investor magazine; Number oneNo. 1 in the 2024 Institutional Investor Developed Europe survey; Number oneNo. 1 in the 2024 Emerging Europe, Middle East & Africa survey; Number twoNo. 2 in the 2024 Institutional Investor All-America survey; and Number twoNo. 2 in the 2023 Institutional Investor Global Fixed-Income Research survey. For more information about any awards cited, read the B of ABofA Global Research awards document (PDF).

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