This Quick Bite (QB) will identify several of the big issues investors are facing this year. It aims to ask the questions, rather than answer them – recognising that each one is highly complex, multi-faceted, and will be affected by forthcoming data. The starting point is knowing what to look for rather than guessing what the answer might be. In future editions, each of these issues will be the subject of their own QB, hopefully allowing the space and content to do them justice. I’ve sourced much of this material from the Goldman Sachs (GS) Global Strategy Conference in London, held in January, where they polled participants so we are able to provide a current insight into investment industry thinking.
- How fast will the US grow this year?

Source: Goldman Sachs
Consensus is for real GDP growth in the world’s largest economy of 2.1%, with GS expecting 2.6%. However, we appear to be in an upgrade cycle with regular increases in many forecasts hitting desks as data points are released. Indeed, the International Monetary Fund (IMF) has recently upgraded their forecast of US growth from 2.2% to 2.7%. Trump is now President and has started in typical hyper-active fashion. Whether he can retain the confidence of business, households and the markets will be critical.
- Will the US Federal Reserve (Fed) cut rates further in 2025?
Central bank interest rate policies – the Fed, European Central Bank (ECB), and the Bank of England (BoE) – forecast for 2025, indexed to 0 in January 2025. This shows that the ECB is likely to make the largest rate cuts in the year.

Source: Goldman Sachs
How much will the Fed cut in 2025? Based on respondents at the GS Global Strategy conference, see expectations in the chart below. Certainly, interest rates are expected to come down in 2025, and there is little chance (only 4%) of them being raised. The baseline forecast is for two 25 basis point (bp) cuts this year, currently expected in June and December, probably followed by one further cut in 2026 to a terminal rate of 3.5-3.75%. Probably the risks to this forecast are that the Federal Open Market Committee (FOMC) might decide to cut before June if there is a sharper deterioration in the economic data (e.g. say caused by a trade war).

Source: Goldman Sachs
- How will the policies of the new Trump administration impact the US and the rest of the world?
This is probably the biggest unknown, and while we can all make our guesses, we will have to wait and see. Trump is an unpredictable character, and he likes to keep adversaries (and allies) off balance and do the unexpected. Is he just a lot of bluster, or is he committed to disrupting and reinventing the American (and global) status quo? Tariff policy and the potential for a global trade war are certainly a key part of this issue. So are climate change and energy policy, repatriation of illegal immigrants, de-regulation, merger and acquisition policy, health policy, etc.
- Where are the best long-term opportunities in emerging markets (EM)?
The chart below shows the GS Strategy Conference participants’ views, with India the clear winner, and China relatively low down the rankings. There are issues with structural weaknesses in China that will take further time to resolve (such as real estate and housing crises, demographics, capital outflows, and deflation), and pressure on EM economies because of the high US dollar (USD). Nevertheless, those EM equity markets with strong domestic fundamentals that are relatively insulated from external risks and have supportive local policy are well placed to outperform. We are attracted to India but recognise that much of the potential growth is already baked into expensive Indian markets. There remain outstanding opportunities for Australia to expand and deepen our trading, cultural, political, and military ties with India.

Source: Goldman Sachs
- What is the biggest risk for the global economy and markets in 2025?
A global trade war as a consequence of Trump ratcheting up tariffs on various countries is probably the most significant risk to the global economy and thus markets. Some 41% of GS conference participants expressed this concern.

Source: Goldman Sachs
This worry will continue until we know precisely how tariffs will work, which countries they will be imposed upon, at what rates, and when they start. Trade policy uncertainty needs to be reduced, and the sooner the better. Geopolitical risks are the second major concern for 30%, with ongoing tensions in the Middle East, the war in Ukraine, and China-Taiwan tensions. Interestingly, around 20% perceive a resurgence in inflation as the biggest risk (up from 15% last year). This increase may in part be driven by strong labour market data in the US and the recent rebound in energy prices.
- Which region will perform best in 2025 (in local currency terms)?
This is the million-dollar question, and I wish I had the answer! Although current valuations do not provide a fail-safe guide to future returns, they are a useful and sensible starting point. So we’ll end this QB with a snapshot of where valuations are relative to their long-term ranges. Quite clearly, the US is exceptionally expensive, with a forward price-earnings ratio of 22 times, and above the top of the long-term (20-year) range. Furthermore, this remains true even if we exclude the largest technology companies with the best growth profiles.

Source: Goldman Sachs