Pictet Wealth Management outlines its 2025 outlook, highlighting cautious optimism amid economic volatility and the expected return of Donald Trump to the presidency. Strategist Frédérik Ducrozet notes improved economic conditions but warns of unpredictable Trump policies impacting international relations and tariffs. He emphasizes the Republican Party’s precarious position regarding budget measures and the potential inflationary effects of proposed policies. Pictet forecasts a slowdown in U.S. GDP growth and calls for urgent attention to France’s long-term growth challenges.
Pictet Wealth Management’s 2025 Outlook Amid Political Changes
As we step into the new year, Pictet Wealth Management has shared its projections for the fiscal year 2025, coinciding with Donald Trump’s anticipated return to the White House. Frédérik Ducrozet, a strategist at Pictet WM, expresses a cautiously optimistic outlook despite ongoing economic turbulence. He notes, “The overall situation in the United States appears promising, especially with the America First plan and favorable inflation reports.”
Economic Concerns and Political Dynamics
Ducrozet highlights that recent fears have significantly subsided; for instance, a disappointing employment report earlier this summer had previously unsettled the markets and reignited recession concerns. However, optimism is tempered by the unpredictable nature of the Trump administration’s policies, which have sparked confusion regarding international relations, especially concerning Greenland, the Panama Canal, and Canada. The contentious issue of high tariffs, frequently mentioned by Trump, remains unresolved. Ducrozet reassures that it is unlikely Trump will enforce a blanket 20% tariff on all imported goods globally. Instead, he views such threats as negotiation tactics rather than definitive policies.
Moreover, Pictet WM emphasizes the precarious position of the Republican majority in Congress, particularly with the midterm elections on the horizon in 2026. Ducrozet argues that overly harsh budgetary measures could risk the Republican hold on the House, especially given the nation’s substantial deficit exceeding 6% and the need to refinance one-third of its debt within the next year. He believes that some Republicans may oppose extreme Trumpist policies because of these financial realities.
A paradox arises in Trump’s proposed policies, which could exacerbate inflation despite being a response to public discontent over rising prices. Ducrozet warns that if these measures are excessively radical, they could trigger an increase in bond rates and constrain the Federal Reserve’s ability to lower interest rates. He points out that China and Europe, despite their weaker positions, could retaliate, further complicating the economic landscape for the U.S.
In terms of tariff expectations, Pictet WM forecasts an average level of 5%, although it acknowledges that China might struggle to avoid the 20% tariff target set by Trump. While the Republicans have pledged to reduce the corporate tax rate from 21% to 15% for domestic producers, Pictet WM anticipates a more modest rate of 18%, citing the potential political and financial challenges of implementing a steeper reduction.
Lastly, while the Trump/Musk partnership has aimed for a $2 trillion reduction in the federal budget through a newly proposed efficiency department, Pictet WM considers this figure overly ambitious. According to Ducrozet, achieving even $500 billion in savings over a decade would be a monumental achievement.
Pictet WM projects a slowdown in U.S. GDP growth, predicting a drop from 2.7% in 2024 to 2.3% in 2025, while global GDP is expected to rise slightly from 3.1% in 2024 to 3.2% in 2025. For the Eurozone, growth is forecasted at 1% in 2025, up from 0.9% in 2024. The bank also anticipates a 50 basis point reduction in Federal Reserve rates and a 125 basis point decrease for the European Central Bank in 2025.
Frédérik Ducrozet further comments on the challenging situation in France, stating that while debt levels are a concern, the bigger issue lies in long-term growth potential. He identifies three critical areas that need urgent attention to avoid further deterioration of growth prospects: the ongoing situation in Ukraine, the need for a more competitive energy policy compared to the U.S., and the establishment of a robust capital market that facilitates mergers among major banks and champions across Europe to better finance businesses.