Cross Asset Investment Strategy - January 2025

• China’s leadership explicitly advocates for unconventional policies that include monetary easing and a more expansionary fiscal policy. However, we believe these policies will not offset the existing structural drags and US tariff impacts completely.
   
• We expect China’s growth to remain on a downward trend, slowing from 5.0% in 2024 to 4.1% in 2025, and 3.6% in 2026. 
   
• In the case of aggressive US trade protectionism and export controls, China should keep its expansionary fiscal stance for longer than currently expected. 
   
• Chinese equity will be influenced by the incoming Trump administration's foreign policy, while additional stimulus could support Chinese markets, particularly domestic stocks. We maintain a neutral stance favouring domestic markets.

Central Bank Watch: The Fed's dilemma
Main and alternative scenarios
Macroeconomic Forecasts

Geopolitics: Tail risks to watch in 2025

A semblance of a goldilocks ahead of Trump’s inauguration

A semblance of a goldilocks ahead of Trump’s inauguration Markets have cheered any good news emerging in 2024 from the economy, corporate earnings and the political environment, although occasionally they were caught by surprise. Looking ahead, they will be driven by earnings momentum, a scenario of slowing US growth, and rebalancing labour markets but not drastically weakening. On the other hand, the Fed getting a bit more hawkish and Trump’s approach to trade along with the international response could create volatility. Outside the US, European growth and policy-making and China’s response to its domestic problems will drive the markets.