Research
The House View: Snapshot
Navigating Trump 2.025
Deutsche Bank
Macro views
World United States
— We expect global growth of 3.2% in 2024 and 3.1% in both — We forecast GDP growth of 2.7% in 2024, 2.5% in 2025 and 2.4%
2025 and 2026. in 2026.
— Impacts of US policy to differ by region. Set to be positive — The new administration’s expected policy mix of modest tax
for the US initially, but negative on a more global view. cuts, deregulation and initially targeted tariffs will be positive for
— Conflicts remain ongoing in the Middle-East and growth in 2025, but reduce upside in 2026.
Ukraine, with escalation a significant risk. — Policy shifts are also expected to prove inflationary. We raise our
inflation targets to 2.6% in 2025 (from 2.3%) and 2.7% in 2026
(up 0.7ppt).
— We expect lower unemployment (3.9% vs 4%+) in 2025 due to
reduced downside risks to the labor market and stronger growth.
Europe Germany
— We reduce our growth outlook for the Euro Area to 0.7% in
— 2024 saw the German economy most likely contract and we
2024, 0.8% in 2025 and 1.0% in 2026.
expect economic growth of 0.5% next year.
— We factor a 0.3-0.4pp hit to GDP from tariffs into our
forecasts, spread over 2025-26. — Germany’s labour market is cooling. Unemployment is set to
rise in 2025, potentially reaching the pandemic peak of 6.4%.
— US tariffs increase the need for a strategic policy shift,
although political fragmentation and high public debt levels — German industrial production volumes have declined 15% vs
pose challenges in coalescing around a new growth strategy. 2017 levels, and a meaningful recovery will likely need to
— A more severe trade war is a risk, but we see the downside as wait until 2026.
being limited by the assumption that this would elicit a — Global trade tensions will weigh on business investment and
stronger response from Germany and the EU. further challenge export competitiveness.
China Emerging markets
— Expansionary macro policies have boosted growth. We — The EM outlook has been upended due to potential of a
forecast real GDP growth of 4.8% in 2025 and 4.6% in 2026. negative growth/trade shock from US tariffs, likely higher
— The property market shows tentative signs of recovery, but balance sheet pressure from delayed easing cycles, and
possible shifts in the bilateral relationship with the US.
high levels of unsold housing is depressing prices, raising
concerns about the recovery’s sustainability. — Asia: Policy trade-offs likely most acute here, given higher
— We expect significant fiscal stimulus will be announced in trade sensitivity, more economic ties to China and low real
rate buffers.
March 2025.
— While our base case assumes that US tariff hikes will be — LatAm: Also facing policy trade-offs but magnitudes may be
lower; impact of trade frictions and uncertainty to delay,
phased and capped at 20%, escalation is a key risk. US tariffs
rather than disrupt, easing cycles.
of 50% on China and 10-20% on the rest of the world could
see China’s growth fall to c.4% in 2026. — CEEMEA: A heterogenous mix, but given closer ties to the
European cycle, rates are likely to be lower.
Key Tariffs. An elevated trade war is the most obvious risk for all economies and assets, with higher tariffs
H potentially causing higher inflation in the US and lower growth in the Eurozone.
Geopolitical volatility. Trump may push for a deal between Ukraine and Russia, with risks that the
downside M conflict escalates. On oil, the US approach to Iran may tighten supply, while geopolitical risk may
cause temporary prices rises.
risks M US-EU Divergence. A more severe trade war would increase divergence, with Euro Area inflation
trailing the US unless, or until, fiscal spending ramps up.
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Deutsche Bank AG/London
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The House View: Snapshot (continued)
December 2024
Market views
— Potential for US policy impacts to spillover globally. If the new administration focuses on growth, this could
Market be very positive for the US, and other economies may also benefit.
Sentiment — The main downside risks lie more into 2026, with the potential for more aggressive policies (e.g on trade) to
cause the Fed to cease the cutting cycle, with knock-on effects globally.
— 2025 S&P 500 year-end target of 7000, with robust equity inflows continuing, though we do factor in
some slowing of the pace.
Equities — At the sector level, we maintain a cyclical tilt and are: (i) neutral: Mega-cap growth, Technology,
Industrials, Energy, Utilities and Real Estate (ii) overweight: Financials, Consumer Cyclicals and Materials
and (iii) underweight: Healthcare, Staples and Telecoms.
%
— Forecast a peak of ~4.75% for the 10-year UST yield and ~2.50% for the 10-year German Bund yield.
Rates — We expect US policies will raise the nominal neutral rate to c.4% and lead the Fed to stay above neutral for
longer, while we believe the ECB will have to bear the brunt of the policy easing in response to US tariffs.
— YE-25: $IG and $HY spreads at 110bps and 360bps, €IG and €HY spreads at 120bps and 380bps.
— US credit spreads will start ‘25 tight, but with a hawkish Fed pivot near, we will likely see the Fed disappoint
Credit market expectations on cuts and rates volatility rise, meaning we see spreads gradually widening.
— European credit spreads will start 2025 at fairly cheap valuations vs $ credit. They will face resistance in
H1-25 before facing a more positive backdrop later in 2025.
— EUR/USD at 1.03 by Q4 2025.
FX — Combination of central bank repricing and additional safe-haven dollar risk premium to push dollar-euro
cross towards parity in ‘25. More aggressive US policy would likely cause EUR/USD to drop below 1.00.
— 2025 Brent forecast of $66/bbl, with a year-end target of $62/bbl.
Oil — 2025 fundamentals look poor. We anticipate that the OPEC+ supply ramp up will proceed despite persistent
delays. Potential oil friendly policies under a Trump administration also weigh on our expectations, though we
think that the biggest unknown on US oil policy will be the approach to Iran.
— Fed: 25bp cut in Dec-24, no cuts in 2025; anticipate a return to neutral (3.75-4%) over 2026-2027.
Monetary — ECB: 25bp cuts at next 5 meetings, 25bp cuts in Sep & Dec-25. Terminal rate of 1.5% at end-25.
Policy — BoJ: 25bp hike in Dec-24 to 0.50%, 25bp rises in both Q3-25 and Q1-26. Terminal rate of 1% by Q1-26.
— BoE: 25bp cuts in Feb, Aug, Nov and Dec ‘25, rates at 3.75% by end-25. 3.25% terminal rate forecast by
Q1-26.
— PBoC: Rate cuts likely limited to 20bp, 1.3% at end-25.
Key macro & markets forecasts
GDP growth (%) Central bank policy rate (%) Key market forecasts
2024F 2025F Current Q1-25F Q4-25F Current Q1-25F Q4-25F
Global 3.2 3.1 US: Federal Funds Rate 4.625 4.375 4.375 US 10Y yield (%) 4.23 4.75 4.65
US 2.7 2.5 Eurozone: Deposit Facility Rate 3.25 2.50 1.50 EUR 10Y yield (%) 2.05 2.50 2.55
Eurozone 0.7 0.8 Japan: Policy Balance Rate 0.25 0.50 0.75 S&P 500 6050 6400 7000
Germany -0.2 0.5 UK: Bank Rate 4.75 4.50 3.75 Oil WTI (USD/bbl) 70.11 68 58
Japan -0.3 1.5 China: 7d OMO Rate 1.50 1.30 1.30 Oil Brent (USD/bbl) 73.81 72 62
UK 0.9 1.3 EURUSD 1.05 NA 1.03
China 4.9 4.8
2025 Macro events calendar
January 2025 February 2025 March 2025
01 EU Poland assumes European Council Presidency 06 UK Bank of England Decision 06 EZ ECB Decision
20-24 WEF Annual Meeting 23 DE German Election 19 US Federal Reserve Decision
24 JN Bank of Japan Decision 19 JN Bank of Japan Decision
29 US Federal Reserve Decision 20 UK Bank of England Decision
30 EZ ECB Decision 20-21 EU European Council Meeting
— Navigating Trump 2.025, 02 December 2024
Recent — Ongoing Resilience, 01 October 2024
editions — Optimism with uncertainties ahead, 11 June 2024
Analyst Certification
The views expressed in this report accurately reflect the personal views of the undersigned lead analyst(s). In addition, the undersigned lead analyst(s) has not and will not
receive any compensation for providing a specific recommendation or view in this report. Marion Laboure / Jim Reid
