Despite a „challenging market environment“, Deutsche Bank sees some good investment opportunities for investors in 2025. In his Capital Markets Outlook for the coming year, Christian Nolting, Global Chief Investment Officer at Deutsche Bank, begins by taking a look back – after all, the first five years of the decade weren't exactly uneventful. With the pandemic, the vaccine, the start of the Russian war of aggression against Ukraine, artificial intelligence, and political frictions that have accompanied a myriad of elections around the globe this year, Nolting looks at buzzwords that have recently impacted investors, and will probably continue to do so. Deutsche Bank assumes that 2025 will also be characterised by technological change, political dynamics, and geopolitical risks such as the conflict between the USA and China.

Despite all the uncertainties, the markets have performed well in recent years. And Nolting also expects growth in the future, albeit at a slower rate. Productivity is therefore an even more important driver of growth. Artificial intelligence and cross-sector technologies are key to this. However, it is also crucial which countries and which sectors perform accordingly, thanks to productivity gains.

Nolting has identified four growth sectors here: although the healthcare sector, which is closely linked to demographics, has lagged behind other sectors in terms of performance over the past ten years, this also offers potential for the future. In the healthcare sector in particular, AI could ensure a major increase in productivity. Healthcare is also a good stabiliser for the portfolio.

The second growth sector for Deutsche Bank is consumer goods. Due to the rise of the middle class, Nolting expects very strong growth here in India, China and the rest of Asia. In contrast, the USA's share will decrease in the future.

Nolting believes that the technology sector, which has recently enjoyed above-average growth, will continue to have high growth potential in the future. For productivity, tech is „the most exciting topic“.

The fourth and final growth area for Deutsche Bank is its own sector: finance. There is a cyclical tailwind for financial stocks in the USA and Europe.

After Nolting, Robin Winkler, the new Chief Economist Germany at Deutsche Bank, and successor to the long-standing Chief Economist Stefan Schneider, who is now Senior Advisor for Germany and Europe, took a closer look at the German economy. Winkler had less good news to share than Nolting. He expects GDP growth of around 0.5% in 2025, and then 1% in 2026. In view of the fact that the German economy has not grown since 2019, this could be seen as positive, but with these forecasts, it still lags far behind the growth trend of the 2010s. Nevertheless, investments will stabilise and the risk of recession has been averted for the time being, says Winkler. The year 2024 was disappointing, and Deutsche Bank was more optimistic here in its last capital markets outlook a year ago. Household consumption was particularly disappointing. Despite high income growth, this has not been reflected in higher consumer spending, as has so often been the case in the past. A gap that even Deutsche Bank cannot easily explain for the time being.

For the future, Winkler expects savings rates to normalise again, although this also applies to wage growth. Based on recent experience in Germany, private consumption will no longer be the main ray of hope in the near future, while public consumption will continue to grow strongly. At least in the first half of 2025, weak investment will remain a barrier to growth, but – unlike industry – construction should recover thanks to falling interest rates, Winkler predicts.

Another glimmer of hope is what Deutsche Bank summarises under ‘Other investments’: Spending on IT and software is rising anti-cyclically, and by a significant amount. This points to a structural change.

While inflation-related uncertainties in Germany are diminishing again, political uncertainties remain. Winkler expects an improvement in Germany in the second half of 2025 at the earliest, following the formation of a new coalition government. The situation is not much better in the USA, where Donald Trump first has to settle into his new – and old – office. Given Germany's dependence on the US for foreign trade, there is a considerable downside risk here in view of Trump's tariff plans.

Ulrich Stephan, Chief Investment Strategist for Private Clients at Deutsche Bank, was more optimistic. As a Rhinelander, he is certainly an optimist, and he has identified some opportunities on the markets. The investment strategist expects the Fed to make a small interest rate cut in December, and two further cuts in 2025. „The ECB should do significantly more,“ says Stephan, and Deutsche Bank expects five interest rate cuts down to a level of 2%. The interest rate differentials are likely to further strengthen the dollar against the euro, Stephan notes.

Against this backdrop, he recommends focussing on government bonds in Europe, which offer potential for price gains. Corporate bonds with good credit ratings also remain attractive, while some bonds with weaker ratings are viewed critically by Deutsche Bank.

According to Stephan, the equity markets in the USA are highly valued after the strong years of 2023 and 2024, but at the same time offer above-average profit expectations. This also applies to tech stocks, led by the „Magnificent Seven“. Earnings trends in the US are much more positive, and Big Tech will continue to generate „higher profits than the rest“, while AI development is only just beginning. Deregulation and tax cuts, such as those announced by Trump, could also increase corporate profits by 4 to 5%. Nevertheless, Stephan advises diversification. Overall, the Deutsche Bank man is „cautiously positive“ for equities. The bank sees the S&P 500 at 6,500 points at the end of 2025 and the DAX at 20,500 points. Compared to the economy, the leading German index has also performed very well recently. However, the Dax companies also generate 84% of their turnover abroad.

„Investors should focus on real assets such as infrastructure and commodities in 2025, as electrification and digitalisation are advancing. At the same time, the US market will remain a global centre of gravity with its high return on capital and strong corporate profits,“ explains Stephan. In Europe, the measures called for in the Draghi report could stimulate growth with investments totalling 800 billion euros. The main beneficiaries would be infrastructure, renewable energies, logistics and mobility as well as the healthcare and residential sectors. On the commodities market, industrial metals such as copper, lithium and cobalt, which are important for electrification, will remain in demand in 2025. In contrast, the peak in demand for oil is in sight.

The investment strategist clearly does not have an overly favourable opinion of Bitcoin. However, in view of a price increase of 160% in the current year, Stephan concludes: „Money for investments does not seem to be the biggest problem.“