The US elections turned out to be a ‘clean sweep’, with Trump winning the presidential election and the Republican party gaining a majority in both chambers of Congress. What is more, in just two months, US recession fears and concerns about the Fed being behind the curve have diminished.
Markets have fully embraced a soft-landing scenario, with the US economy slowing but maintaining forward momentum, assisted by lower rates. On tariffs, the world is holding its breath, as they could be announced soon after Trump’s inauguration. Even though actual implementation may not happen before the second half of next year, tariffs (or the threat thereof) are likely causing economic uncertainty, adversely impacting growth. In addition, tariffs are inflationary for those who raise them, hence for the US. While the growth gap between the US and Europe could narrow, we expect the inflation gap to remain in place.
In Europe, Germany is facing early elections in February 2025, and France's government has collapsed after just 90 days in office. France remains in the doldrums as is also visible in a steep decline in business confidence post the Olympic Games. Notably GDP growth in the southern European countries is much stronger than in the north.
Anticipate policy divergence
We expect the ECB to continue cutting rates in steps of 25 bps per meeting next year toward 1.50-1.75%. Uncertainty around the outcome of the intended policies of the new Trump administration is likely to prompt the Fed to a slower pace of easing in H1 2025. However, our central Fed funds rate forecast remains below the 3.50-3.75% that is priced by markets.
Download the publication
Get the latest insights
Subscribe to our newsletter for investment updates and expert analysis.
Important information
The contents of this document have not been reviewed by the Securities and Futures Commission ("SFC") in Hong Kong. If you are in any doubt about any of the contents of this document, you should obtain independent professional advice. This document has been distributed by Robeco Hong Kong Limited (‘Robeco’). Robeco is regulated by the SFC in Hong Kong. This document has been prepared on a confidential basis solely for the recipient and is for information purposes only. Any reproduction or distribution of this documentation, in whole or in part, or the disclosure of its contents, without the prior written consent of Robeco, is prohibited. By accepting this documentation, the recipient agrees to the foregoing This document is intended to provide the reader with information on Robeco’s specific capabilities, but does not constitute a recommendation to buy or sell certain securities or investment products. Investment decisions should only be based on the relevant prospectus and on thorough financial, fiscal and legal advice. Please refer to the relevant offering documents for details including the risk factors before making any investment decisions. The contents of this document are based upon sources of information believed to be reliable. This document is not intended for distribution to or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation. Investment Involves risks. Historical returns are provided for illustrative purposes only and do not necessarily reflect Robeco’s expectations for the future. The value of your investments may fluctuate. Past performance is no indication of current or future performance.