Outlook 2025: Frédéric Leroux (Carmignac)
By Frédéric Leroux, Head of Cross Asset, Fund Manager, Carmignac
What is the economic outlook for 2025?
‘Donald Trump’s election is a major factor. The implementation of his economic program (lower taxes, deregulation, higher tariffs, massive cuts in immigration, ‘streamlining’ of the administration) will initially be favorable to American growth and rising prices. China will have to find alternatives to its exports to the United States by boosting domestic consumption and stepping up its trade effort with its partners in the Global South. This is not a foregone conclusion. In this global context, Europe seems alone and helpless in the face of the American and Chinese economic fighters.
The question of inflation will be specifically American. The pursuit of growth at all costs in the United States will slow down the reduction in key rates and raise the general level of interest rates, contributing to a strong dollar. Only a sharp downward correction in US equities and real estate would be capable of producing a recession in the US, via a negative wealth effect.
This strong dollar will not help emerging countries, which will be constrained in their monetary policy but will not suffer from inflationary pressures. Caught between the possibility of increased protectionism, its inability to reform and its high energy costs, Europe is not in a strong position at a time when inflation is catching up with wages. We must not underestimate the reform of the American administration that Elon Musk is bringing about, and hope for a ‘Whatever It Takes 2.0’ for Europe.’
We must hope for a ‘Whatever It Takes 2.0’ for Europe.