Creand Wealth Management highlights corporate earnings as the key driver of markets in 2025

The global macroeconomic outlook for 2025 appears reasonably positive, with attention focused on the new Trump administration. However, there is some risk of a rebound in inflation. Markets will also be keeping a close eye on ongoing conflicts in Ukraine and the Middle East, as well as the political crises in France and Germany.

Macroeconomic stability and a trend of declining interest rates are typically positive indicators for equities. In this context, the coming months are expected to be bullish for the stock markets. The reduction in corporate taxes in the United States and the anticipated boost to economic growth are likely to be welcomed by the markets.

The firm favours Spanish equities, due to the healthy financial position of the private sector (households and businesses), the strong performance of the real estate sector and improvements in the external sector. It is less optimistic about emerging markets due to the strength of the US dollar, the crisis in China and the imposition of tariffs by the United States. 

Creand Wealth Management, the specialist private banking firm, views the global macroeconomic outlook for 2025 as reasonably positive, although there is some risk of inflation picking up. Looking ahead to the coming year, Creand Wealth Management anticipates corporate earnings to take centre stage, becoming the main driver of index performance across most regions throughout 2025.

The markets are expected to be closely monitoring the Donald Trump’s initial decisions as he begins his second term as President. His decisive victory, which grants him control of both the Senate and the House of Representatives, is likely to act as a catalyst for markets in the months ahead. From the perspective of financial assets, Creand Wealth Management points to the potential impact of the promised tariffs.

Luis Buceta, Chief Investment Officer at Creand Wealth Management, notes that “Trump’s return is likely to boost economic growth, which is already very strong in the US. It is also expected to drive up the public deficit which is already at heights previously seen only during major crises such as wars or the recent pandemic)”. Creand Wealth Management highlights that the uncertainty that Trump generated in 2016 is now significantly lower, as investors are more familiar with what to expect and his economic proposals are largely consistent with those of his first term. 

However, geopolitical instability will also play a crucial role, fuelled by the conflicts in Ukraine and the Middle East, the recent spotlight on Syria and political turmoil in the major European economies. This includes early elections in Germany in February and the collapse of Michel Barnier’s government in France.

In the current landscape, Creand Wealth Management identifies the main risk to financial markets as the potential for Trump’s handling of the public deficit to discourage investors. The firm cautions that close attention will be needed to ensure the US yield curves do not rise too much—a cause for concern if such an increase were to coincide with weakness in the dollar.

The ECB maintains its course, keeping an eye on the data

Regarding monetary policy, Creand Wealth Management anticipates that the ECB will continue with gradual interest rate cuts as previously outlined. The central bank suggested that it will continue to lower rates at this December’s meeting, with further reductions likely in the first three meetings of 2025. The ECB, led by Christine Lagarde, has indicated that inflation may reach the 2% target sooner than expected. However, Miguel Ángel Rico, Investments Director at Creand Asset Management, cautions that “the ECB has not committed to a fixed roadmap. Instead, it remains of the view that future decisions will continue to be data-dependent, with a particular focus on the development of disinflation and wage trends”.

With regards to the US, Creand Wealth Management believes that the robust macroeconomic outlook and the tax cuts promised by Trump should, at the very least, underpin the current growth. According to Creand Wealth Management, this scenario puts pressure on Powell to carefully consider whether to continue lowering the benchmark interest rate.

Positive indicators for equities

Creand Wealth Management believes that macroeconomic stability and a trend of declining interest rates are typically positive indicators for equities. In this context, the coming months are expected to be bullish for stock markets, driven by corporate tax cuts and the anticipated boost to economic growth. The firm is keen to reduce the underweight in equities, tactically moving portfolios towards a neutral position in preparation for a potential year-end rally. However, the firm suggests taking a selective approach, as while current index valuations appear reasonable, it believes that the environment has become more risk-positive following Trump’s victory, with expectations that the economy will continue to perform well.

In terms of geographies, the firm favours the Spanish stock market, which has significantly outperformed its European counterparts and is expected to continue delivering strong returns in the coming years. Luis Buceta, Chief Investment Officer at Creand Wealth Management, explains that “the Spanish economy has been growing at rates more than double the euro zone average for some time now, significantly outpacing Germany and France. This trend is expected to continue in 2025, supported by improvements in manufacturing and services business confidence indices, the financial position of the private and real estate sectors, and the ongoing recovery of the external sector”.

However, the firm is less optimistic about the emerging markets. While these markets have underperformed developed markets for several years and appear very cheap from a valuation perspective, the firm believes that the strength of the dollar, the threat of tariffs and continued downward revisions to economic growth forecasts have dampened the positive outlook, even after the recent announcement of stimulus measures by the Chinese government. Creand Wealth Management considers it crucial for data from China to begin improving, as it is hampering the performance of other emerging markets. The firm highlights that China’s struggling real estate market, excessive debt levels and deflationary environment call for much larger stimulus measures to reverse the country’s fragile situation.

By sectors, Creand Wealth Management expects exporters, utilities (given Trump’s disregard for boosting renewable energy), oil companies and businesses based in countries targeted by the US “reshoring” policy—which pressures manufacturing to return to the U.S., particularly from Mexico and China—to come up against challenges in the coming months. This could negatively impact the European indices, where these sectors hold significant weight. On the other hand, sectors that benefit from reduced regulation or are less affected by tariffs (e.g., domestic companies) are expected to perform better.

Fixed income at optimal levels

In the fixed income space, Creand Wealth Management believes that it will remain at optimal levels, offering attractive returns. The reaction of US fixed income markets following the elections has been clear: fears of inflationary pressures and deficit mismanagement have caused a significant rise in long-term yields, with 10-year Treasury yields reaching approximately 4.45%. Additionally, expectations of further rate cuts by the Fed have been scaled back. In this context, a divergence between interest rate levels in the US and Europe is likely.

Miguel Ángel Rico, Chief Investment Officer at Creand Asset Management, explains that “our main concern is seeing a rate movement in the US similar to what we have seen in the UK, where doubts over the sustainability of public finances due to excessive deficits have created instability. Given this situation, we prefer not to increase durations until the 10-year US Treasury yield exceeds 4.5%, and even then, we would do so gradually. For European bonds, the threshold is set above 2.050%”.

In terms of currencies, Creand Wealth Management believes that Trump’s victory further reinforces the strength of the US dollar compared to other currencies. The policies of the incoming US president are inherently inflationary and likely to expand the already substantial deficit, which in turn suggests that market interest rates will rise. The dollar is expected to remain strong, bolstered by the growing gap in growth and interest rates between the US and other regions.