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The investment climate for 2025 is set to reflect a transformative era, driven by “mega forces” like AI, geopolitical fragmentation, and the energy transition reshaping market dynamics, according to BlackRock Investment Institute’s 2025 Market Outlook (pdf). The firm thinks investors should go big on AI and the low-carbon transition, which it sees requiring investment “potentially on par with the Industrial revolution.”
Who’s set to benefit from the transformation? The US, and emerging markets like Saudi Arabia and India, which are at the “crosscurrent” of these mega forces. The firm is overweight US stocks despite premium valuations on the back of strong corporate earnings, and sees the AI theme “broadening out” throughout the year, which will support US stocks.
US Treasuries and government bonds are not as attractive in Blackrock’s view, due to ongoing fiscal pressures and potentially wider budget deficits as a new administration takes office. The firm favors other developed markets like Europe for bonds or UK gilts, and corporate bonds in the US due to healthy balance sheets.
Rates will stay higher for longer: “We don’t think the Fed is embarking on a typical cutting cycle. We think it will cut further in 2025, and growth will cool a little, but with inflation still above target the Fed won’t have room to cut much past 4%, leaving rates well above pre-pandemic levels,” BlackRock said. The Fed is currently expected to make two rate cuts next year, according to the closely watched “dot plot.”
Globally, BlackRock also sees potential in Japan, supported by corporate reforms and a mild inflationary environment, and remains cautious on Europe and China due to structural and geopolitical challenges impacting investor confidence.
Private markets will be key: While public capital markets are set to deepen as the need for more infrastructure investments rises, private markets will also be key for funding early-stage AI projects, BlackRock says. “Private credit will earn lending share as banks retreat – and at attractive returns,” the PE firm added.
MARKETS THIS MORNING-
Asian markets are mixed in early trading, with Japan’s Nikkei and the Topix both down, along with South Korea’s Kospi. China’s CSI 300, on the other hand, is up, along with Hong Kong’s Hang Seng and Shanghai SE. It’s quiet over on Wall Street where markets are closed for Christmas day.
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TASI |
11,914 |
-0.3% (YTD: -0.4%) |
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MSCI Tadawul 30 |
1,497 |
-0.2% (YTD: -3.5%) |
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NomuC |
30,920 |
-0.1% (YTD: +26.1%) |
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USD : SAR (SAMA) |
USD 3.75 Sell |
USD 3.75 Buy |
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Interest rates |
5.0% repo |
4.5% reverse repo |
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EGX30 |
29,973 |
-0.5% (YTD: +20.4%) |
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ADX |
9,435 |
+0.4% (YTD: -1.5%) |
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DFM |
5,080 |
+0.5% (YTD: +25.1%) |
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S&P 500 |
6,040 |
+1.1% (YTD: +26.6%) |
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FTSE 100 |
8,137 |
+0.4% (YTD: +5.2%) |
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Euro Stoxx 50 |
4,858 |
+0.1% (YTD: +7.4%) |
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Brent crude |
USD 73.58 |
+1.3% |
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Natural gas (Nymex) |
USD 3.95 |
+7.9% |
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Gold |
USD 2,636 |
+0.3% |
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BTC |
USD 98,680 |
+4.9% (YTD: +133.6%) |
THE CLOSING BELL: TADAWUL-
The TASI fell 0.3% yesterday on turnover of SAR 3.8 bn. The index is down 0.4% YTD.
In the green: Al Baha (+9.1%), Chemical (+4.7%) and Burgerizzr (+4.4%).
In the red: eXtra (-6.8%), MESC (-4.3%) and Amiantit (-3.2%).
THE CLOSING BELL: NOMU-
The NomuC fell 0.1% yesterday on turnover of SAR 50.1 mn. The index is up 26.1% YTD.
In the green: Knowledge Tower (+14.0%), Miral (+9.4%) And Group Five (+7.5%).
In the red: Enma Alrawabi (-12.7%), Neft AlSharq (-7.7%) and Watani Steel (-7.6%)
