2025 :
THE BIG THINK
2025 :
Balancing risks , opportunities and evolving strategies
By David Crosoer , PPS Investments Chief Investment Officer
As the first quarter of 2025 unfolds , investors face a significantly different landscape than expected at the start of 2024 . Predictions of aggressive interest rate cuts , particularly in the US , were replaced with a more cautious approach , with the first rate reduction only occurring in September 2024 and the total cut for the year staying below 1 %.
According to the Bank for International Settlements , this shift has allowed economies like South Africa to ease their monetary policies , with more than 75 % of central banks adjusting rates in the past six months .
At the same time , the second Trump presidency has shifted focus from interest rates to deregulation and corporate tax cuts , fuelling optimism for US equities . In response , PPS Multi- Managers closed its global equity underweight and cautiously increased exposure to South African equities , following the formation of the Government of National Unity .
The impact of US president Donald Trump ’ s policies remains uncertain . While they may benefit the US economy in the short term , the rollback of climate regulations and potential import tariffs could disrupt global trade . As always , balancing risk and opportunity in this evolving market remains essential .
CLIMATE REGULATION : THE COST OF INACTION
According to the Network for Greening the Financial System ( NGFS ), the avoidable costs of climate change could amount to 9 % of cumulative gross domestic product by 2050 , compared to the 2 % cumulative cost of mitigating it . Consequently , withdrawing from climate regulations could make catastrophic climate change much more likely and more expensive in the long run .
Similarly , while it is equally hard to gauge the eventual impact of Trump ’ s planned tariffs on the global economy and how they will be implemented , global growth could be 0.8 % lower in 2025 and 1.3 % lower in 2026 , based on modelling by the International Monetary Fund . This could potentially hurt US consumers as well .
However , markets have largely ignored any potential longterm consequences and quickly rated Trump ’ s victory as positive for the US equity market and negative for US debt and non-US equities . While this trade might still have legs , the US equity market is already trading at elevated valuations and unexpected negative news from the US ( or positive news elsewhere ) might upset the status quo .
In its portfolios , PPS Multi- Managers has not increased its allocation to global equities from a neutral position following the US election . However , the team did rebalance its global smallcap exposure back to target after a period of significant underperformance . Heading into 2025 , PPS Multi-Managers will likely maintain this neutral stance , relying on its active international equity managers , particularly US ones , to identify and capitalise on available opportunities .
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