Secular Outlook

The early 2020s were marked by two major external shocks: the Covid-19 pandemic and the war in Ukraine. These events led to supply disruptions, which significantly impacted Western economies and blurred the line between cyclical effects and structural changes. In 2024, we have witnessed the normalisation of many economic variables, notably inflation and growth, clearing the path for monetary policy easing in the US and Europe. After careful analysis, we have concluded that the secular trends we projected at the end of 2023 can now be confirmed.

The world will remain multipolar in 2025, and active industrial and fiscal policies will continue to steer economies in a context of strategic reshoring, as is evidenced by the increasing number of large government spending programmes in the US, Europe, and China. China has reached the point where the government is prepared to intervene to counter the deflationary forces affecting its private sector, yet high savings and weak domestic demand may persist, keeping the country in a balance sheet recession for much of the decade. The innovation super cycle theme remains valid, with a broadening of the sectors that will benefit from advances in artificial intelligence. Finally, the best performances since the start of the decade remain attributable to US assets and so-called ‘out-of-system’ assets, which are characterised by limited supply and insulated from potential Western sanctions. We have reintroduced a strategic allocation to gold in portfolios because of the structural demand from non-Western investors for liquid assets that diversify their portfolios away from those assets that are potentially at risk of Western government sanctions.

We hope you will enjoy reading the 2025 edition of the Julius Baer Secular Outlook and that it serves as a useful guide for your investment decisions.