Vincenzo Vedda, who has just been promoted to Global Chief Investment Officer at DWS, sees a „very interesting year“ ahead for investors. However, one in which predictions are not easy. But when have they ever been? Who would have predicted a global pandemic, a war in Europe, or a property crisis in China, a few years ago, Vedda asks rhetorically in DWS's market outlook for 2025.

One big elephant in the room in this outlook is the re-election of US President Donald Trump. Vedda expects greater volatility on the markets, but also sees limits to the Republican Party plans: „We should take Trump seriously, but not literally“, he says.

Pro-business policies in the US are likely to continue, Trump's tax plans will help, and profits will continue to grow, albeit less strongly than this year. The CIO is, therefore, positive about US equities. And Vedda is also optimistic about Europe. The economy is not as bad as it seems. On the contrary, there are signs that production is stabilising. For Vedda, Europe is the „place to be“ for an upturn in the PMIs, i.e. the purchasing managers indices. The lost decade for profits is over.

The CIO of DWS is more sceptical about China, despite the aggressive measures taken by the government there, saying "we remain neutral“.

Vedda takes a more favourable view of the real estate market, which has the worst behind it. And he expects strong momentum for infrastructure in 2025.

DWS Chief Economist Johannes Müller then takes a closer look at the European and US economies. In Europe, economic development is normalisation, and in his view we have seen the bottom. The latest economic data has exceeded forecasts. Müller's view of inflation is somewhat ambivalent: On the one hand, it has fallen faster than expected, but on the other hand, core inflation and service prices are still well above the ECB's target threshold of 2%. Core inflation will also remain high in 2025 as wage growth and service price inflation remain strong.

Nevertheless, Müller expects the ECB to cut interest rates five times by the end of 2025, one this year and four more next year. He also assumes that the discussion in Europe will move in the direction of a more expansive policy to support growth. Müller expects robust growth in the USA, but nevertheless high volatility in the incoming inflation data. A recession should be avoidable. DWS is forecasting three interest rate cuts by the Fed by the end of 2025.

Thomas Höfer, Head of European Credit at DWS, then takes a closer look at the fixed income market. He expects the yield curves to normalise further from the front end and lead to a steeper curve at the middle and long end. The total return for fixed-income securities looks positive for all major fixed-income asset classes, which makes them a risk-adjusted and very attractive investment. Höfer sees a risk in a strong supply of bonds due to further public debt. Corporate loans should perform well in an environment of slow growth. DWS favours investment grade over high yields and bank bonds over non-financials.

David Bianco, CIO Americas, focused on the US equity market. Following the election of Donald Trump, a kind of Trump mania 2.0 has broken out: „Investors are hoping for the best,“ Bianco explains with a view to deregulation, tax cuts and tariffs.

He still considers the „Magnificent Seven“ to be attractive, but the gains of the S&P 500 are likely to broaden out in 2025. The new government is not only in favour of growth, but also open to new technologies. In addition to the technology big caps, the financial sector should also benefit. Due to the increased demand for electricity, not least as a result of AI, utilities could also be among the winners.

Bianco also continues to see healthcare as surprisingly positive. This sector recently suffered losses across the board following the announcement of Robert F. Kennedy Jr. as the future Secretary of Health and Human Services, who is critical of vaccines and pharmaceuticals. Nevertheless, healthcare remains a very attractive sector for Bianco. Even the Trump administration will not reduce spending in this area, just as it will endeavour to maintain strong growth overall. The DWS man expects tariffs on products from China in the near future. And a key question remains how to deal with the issue of migration.

Marcus Poppe, Co-Head of European Equities, is optimistic about the European equity market, saying "it's very hard not to be positive.“ Artificial Intelligence, led by the „Magnificent Seven“ will continue to drive the markets in 2025.

In addition, cyclical markets and sectors will perform better as soon as the leading indicators get better. Poppe expects this improvement in the first half of 2025, with consumer staples and possibly also industrial goods well positioned. European small and mid caps would also benefit from a possible cyclical repositioning. DWS also recommends European banking stocks. For Poppe, the fact that European equities are currently trading at a considerable discount compared to their US counterparts also speaks in their favour.

However, Poppe does see a risk for the stock markets: there is a lot of hope in the topic of AI and a lot of money has also flowed into this area. Investors are now also expecting results.

On the real estate market, Ulrich von Creytz, CIO Real Estate Europe, expects a turnaround in 2025 after two really tough years. He takes the view that capital is sitting on the sidelines, and is just waiting for the right moment to enter.