The U.S. economic growth outlook remains strong, supporting a positive forecast for the stock market in 2025.
Is it still worth investing in the stock market, given the significant uncertainty surrounding geopolitical, tariff, and financial risks (i.e., those arising from adverse monetary policies of central banks)?
The President of the United States, Donald Trump, has so far imposed duties that have taken the form of country-specific measures, largely reciprocal, targeted at specific sectors, and applicable only to nations with certain types of trade relationships (see tariffs against countries that have relations with Venezuela).
He has also demonstrated a certain “flexibility” in their implementation, as he noted on Friday when discussing whether to proceed, granting last-minute tariff breaks, exemptions for goods covered by trade agreements, and potential waivers even for broadly applied tariffs.
Markets responded positively to Trump’s indication that some countries may receive a “respite” from tariffs imposed on one another. However, this upward trend is unlikely to be sustained, given the diverse nature of tariffs implemented and the unpredictability of their enforcement. And especially given the “Trump factor”—a president who frequently makes sweeping remarks about tariffs, often influencing market sentiment.
Analysts frequently rely on historical technical trends in stock price movements, such as the long-term trajectory of the 200-day moving average, to predict future performance. In this political climate, rather than looking at moving averages, it might be more relevant to shift attention to Trump himself, whose statements alone have alternately sent markets soaring—or crashing.
So be careful: The recent volatility in stock indices is primarily the result of U.S. political decisions rather than adverse macroeconomic conditions or shifts in market liquidity.
The S&P 500 gained 0.5% last week, marking its first positive performance in five weeks. Investor sentiment improved on Friday after Trump suggested that there could be “some flexibility” in the planned reciprocal tariffs, set to take effect next week.
Trump’s new round of tariffs appears to be more targeted than the broad threats he has made in recent weeks. According to Bloomberg, citing sources familiar with the matter, some countries may receive exemptions, and existing duties on steel and other metals may not be cumulative. Trump also expressed a willingness to speak with Chinese President Xi Jinping and stated that the U.S. Commerce Secretary would engage in discussions with his Chinese counterpart this week.
The full extent and exact implications of the tariff war on the global economy and financial markets remain uncertain. There is a potential for escalating retaliatory measures in the weeks ahead, possibly driving further market volatility. Nevertheless, I remain convinced that U.S. equities will end the year higher than current levels, and I view this near-term turbulence as a buying opportunity.
A key point to remember: The outlook for U.S. economic growth remains positive. As long as credit continues to flow and liquidity remains ample within the financial system, we can rule out a "recession" scenario.
Current economic forecasts do not indicate an impending U.S. recession. In the base-case scenario, selective tariffs and retaliatory measures could slow economic growth compared to last year but should not prevent the U.S. economy from expanding at an estimated 2% in 2025, in line with historical growth rates. Moreover, I anticipate that the Federal Reserve will continue easing monetary policy, with its latest economic projections pointing to interest rate cuts totaling 50 basis points by year-end.
As seen in 2022—when the U.S. economy sustained growth despite aggressive Fed rate hikes—a resilient economy supported by strong consumption and investment should enable solid earnings growth for the S&P 500 in 2025.
From my experience, a strategy of buying stocks after a 10% decline tends to generate superior returns compared to waiting for a -15% or -20% drop that may never materialize in a healthy economic cycle.
Of course, past performance is no guarantee of future results. However, waiting for deeper corrections before entering the market carries the risk of missing out on a swift rebound.
I have seen cases where losses after a -10% entry were significant (e.g., the Lehman Brothers collapse), but historically, these events have been more than offset by subsequent rapid market recoveries, particularly when central banks maintained an accommodative stance—as they are in the current phase.
Where to invest then? In leading U.S. artificial intelligence companies, which are likely to maintain dominance despite China’s advancements in the sector.
I acknowledge that investing right now is challenging. The fear of further losses—on top of the declines already experienced in recent weeks—can be paralyzing. Additionally, uncertainty surrounding trade policies introduces another layer of risk to equities. However, I strongly believe that portfolio diversification across commodities, equities, bonds, and cash remains critical.
That said, I still expect the S&P 500 to close the year higher, and I advocate a strategy of gradual market entry, buying strategically during dips—including high-quality AI stocks (e.g., Amazon, Microsoft, Nvidia, and Google). Naturally, this is suitable for investors with an appropriate risk profile.
| DISCLAIMER The information and views expressed in this article should not be used as the sole or primary basis for investment decisions. The reader retains full discretion over investment choices and bears sole responsibility for them, as only they can assess their risk tolerance and investment horizon. The information provided is for informational purposes only and does not constitute, nor should it be construed as, an offer or solicitation to invest. |
Original article published on Money.it Italy 2025-03-28 05:21:00. Original title: Conviene ancora investire nel mercato azionario oggi?
