Linea Mercati Interview 12/17/24
December 18, 2024
Fed, what to expect from the last meeting of 2024
December 18, 2024PETER CARDILLO
CHIEF MARKET ECONOMIST
INTRODUCTION
We see the U.S. economy growing at approximately 2.25% - 2.50% in 2025. This moderate growth rate suggests a continuation of the past pandemic recovery phase. Factors contributing to this growth include consumer spending, business investments, and a stable labor market. However, growth may be hampered by external supply chain disruptions and geopolitical tensions. Inflation is estimated to remain stable with present prices increasing, affecting consumer goods and services. While inflation rate may be compared to the peaks in 2027 and 2022, levels are expected to be above the fed target rate of 2%. This sustained inflation could lead to higher costs of living, erosion of purchasing power, and potentially dampening consumer confidence and spending. The potential implications of trumps planned policies, particulary regarding tariffs and immigration, could have significant implications for the economy. Proposed tariffs and trade restrictions might lead to higher costs for consumers and business. In summary, the U.S. economy in 2025 is likely to experience moderate to above average growth at midst sticky inflation.
EQUITIES
2025 may be characterized by heightened volatility and generally, positive market sentiment. On the other hand, key risk factors include economic downturns in the United States and a potential slowdown for the global economy, impacting consumer spending and corporate earnings. Overall, while opportunities for gains exist, the atmosphere in 2025 could be one of cautiousness and defensiveness with the indices moving higher, yet at a slower pace as witnessed in 2024.
Forex
In 2025, the value of the U.S. dollar will likely reflect economic shifts, geopolitical dynamics, and potentially - trade wars. The outlook for the U.S. dollar remains positive. While talk of replacing the dollar as the reserve currency may influence short term trends, the chances of the dollar being replaced, is nil at best.
Energy
Oil prices are likely to be influenced by supply and demand dynamics. We also see potential increases in global demand, particularly from emerging markets which could lead to an average price of $80 in 2025.
Fixed Income
Interest rates in 2025 include many variables, including economic growth, inflation, central bank policies, and global events. Persisting inflation could lead to higher rates as central banks respond to maintain stability. This said, we see the fed taking a more cautious stand on rates and could likely respond to inflation and trade concerns by reversing the present monetary policy, therefore becoming more restrictive.
Gold
Gold prices are likely to remain strong in 2025, driven by several factors. Inflation hedges as investors seek gold as a safe haven, geopolitical tensions, ongoing global uncertainties, and with central banks boosting their gold reserves, we see gold rising above $3,000 per ounce in 2025.
Silver
We see a continuing bullish trend in 2025 due to industrial demand with growth emanating from silvers industrial applications. Our target for 2025 is $50 an ounce.
Disclosure
This report has been prepared as a matter of general information regarding market conditions, it is not to be a complete description of any security or company mentioned, and is not an offer to buy or sell any security. All facts and statistics are from sources believed reliable, are not guaranteed to accuracy. Transactions may be effected which are inconsistent with research reports. The views expressed herein accurately reflect personal views.
- This is not an offer to sell or solicitation to buy any security in any jurisdiction where such offer or solicitation would be illegal.
- Clients should consider whether any advice or recommendation is suitable for their particular circumstances and, if appropriate, seek profession advice, including legal and tax advice.
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