Hoshang Daroga

With a decisive Trump victory, we expect America to continue to dominate global markets in terms of economic growth, corporate earnings growth and global equity market performance. America First policy making will underpin US economic, earnings and market exceptionalism. We expect American exceptionalism will now be the objective, not the result of policy-making. Thus far, high equity market valuations have been justified and underpinned by strong corporate earnings growth. Hence the need for continued selectivity through 2025. We see the risk of debt indigestion as government debt levels are spiralling in the US and the UK. Debt levels look (just) sustainable for now, but are in fine balance. Any upgrade to borrowing or downgrade to growth could destabilise this fine balance and rattle the bond markets. We also see "Zombie" inflation, which means it's down but not dead. Wage growth pressure, trade frictions and energy volatility create upside risks to inflation. Re-acceleration of US inflation and geopolitical shocks are the main risk to markets as these could trigger a contraction of high valuation multiples.

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