The chief investment office at Zurich-headquartered UBS Global Wealth Management looks at key developments that will shape the next stage of this decade, including US political change, transformative innovations, and lower interest rates.  

UBS Global Wealth Management believes that 2025 should bring further upside for stock markets, with US equities being the preferred market for the firm, echoed by other wealth managers.

“We are overweight in US equities,” Mark Andersen, co-head of global asset allocation at UBS GWM, said at a media event this week. The combination of resilient US growth and lower Fed rates has historically been a powerful combination for US stocks. Andersen thinks that artificial intelligence (AI) will play out in 2025, and favors US tech firms, utilities and the financial sector.

AI and power and resources constitute two opportunities within equities with the potential to provide significant and sustained profit growth, that could earn investors in these areas outsized long-term returns, the firm continued. It sees the best opportunities in AI-linked semiconductors and US megacaps.

Other wealth managers, like Goldman Sachs Asset Management and Pictet Asset Management, also favor US equities in 2025 due to strong earnings and “Trumponomics”. See more commentary here and here.

UBS GWM also believes that diversified exposure to Asia ex-Japan could be an effective way to capture potential upside in the region while managing risks. Korea’s and Taiwan’s exports, crucial to global supply chains, are less likely to be affected by tariffs owing to their non-substitutable nature, the firm added. India offers a compelling domestic growth story, and UBS GWM remains positive on China’s internet stocks, which could benefit from potential stimulus measures. In Europe, eurozone small- and mid-caps and Swiss high-quality dividend stocks look attractive.

With cash returns set to diminish in light of further central bank rate cuts, UBS GWM thinks that investment grade bonds offer attractive yields and potential for capital gains, with total expected returns in the mid-single-digit range in dollars.  

Meanwhile, the US dollar is likely to be caught between short-term positive drivers, including tight US labor markets and tariffs, and longer-term negatives, including overvaluation. “Investors should use periods of strength to reduce US dollar exposure,” UBS GWM said. 

It also believes that lower interest rates, persistent geopolitical risks, and US government debt concerns should continue to support gold in 2025. It expects gold to break new record highs. There are long-term opportunities in copper too and in other transition metals as demand rises alongside rising investment in power generation, storage, and electric transport. 

Finally, UBS GWM believes that the outlook for residential and commercial real estate investments is bright. With constrained supply and rising demand, there are opportunities in sectors including logistics, data centers, and multifamily housing. 

Macroeconomic outlook
UBS GWM highlighted how US president-elect Donald Trump has the potential to reshape the US economic and geopolitical landscape. Tariffs in particular have the potential to disrupt trade, reduce domestic US demand, and increase inflation. A tariff shock could trigger a stagflationary downside scenario. At the same time, negotiations with trading partners or domestic legal challenges might mitigate their scope and impact, and tax cuts and deregulation could support a more positive market narrative. In its base case, the CIO believes that the S&P 500 could reach 6,600 by the end of 2025, driven by solid US growth, lower interest rates, and AI advances.  

“Elsewhere, in Asia, China’s growth is likely to slow, with reactive fiscal stimulus measures unlikely to be sufficient to fully offset the impact of tariffs and structural challenges,” UBS GWM continued. It believes that India and Indonesia are likely to experience stronger growth due to favorable demographics and lower tariff risks. In fact, US-China tensions might actually enhance investment in other parts of Asia, bolstering infrastructure and construction activity.

UBS GWM also forecasts Japan’s growth to accelerate to 1.1 per cent in 2025 from -0.2 per cent in 2024, driven by higher wages and consumption, with a Bank of Japan rate hike anticipated by mid-2025. It projects Australia’s GDP to increase to 2 per cent in 2025 from 1.2 per cent in 2024, aided by fiscal measures to boost consumption and increased mineral demand for renewable energy.

In Europe, growth is likely to be uneven and subdued, but it should improve as wage growth remains strong while interest rates fall. Spain, the UK, and Switzerland should outperform with growth rates above 1 per cent, compared with more modest growth of around 1 per cent in Germany, France and Italy. Germany, which has a strong manufacturing base, could also be hard hit if Trump hikes tariffs.

UBS GWM believes that the 5Ds – debt, deglobalization, demographics, decarbonization, and digitalization – remain key factors likely to drive markets and economies in the years to come presenting both opportunities and risks for investors. In aggregate they should lead to higher growth, e.g. driven by artificial intelligence, which could prove to be one of the most influential innovations of the century, and periods of higher inflation, due to more deglobalized trade and higher energy prices driven by decarbonization efforts.