Despite global challenges, 2025 should see economic growth

Despite economic uncertainty, Leslie Alba, head of portfolio solutions at CIBC Asset Management, sees a pathway for growth in the year ahead.

“We’re optimistic for equity and fixed-income investors in 2025,” Alba said in a Jan. 28 interview.

Listen to the full conversation on the Advisor To Go podcast, powered by CIBC Asset Management.

Global economic growth is expected to continue this year, she said, with U.S. equities leading the way — although it may not be as far out front as it has in recent years.

“The gap between the U.S. and the rest of the world is expected to narrow,” she said.

And while Alba remains positive on U.S. equities, she warned that “on traditional valuation metrics, U.S. equities look expensive” with market concentration at peak levels and the Magnificent Eight — which includes semiconductor manufacturer Broadcom Inc. now — accounting for around 35% of the U.S. market.

She also sees strong potential in Canadian equities. 

“Growth recovery in 2025 is expected to be a pretty strong tailwind for corporate earnings,” she said, adding that domestic markets should perform well relative to their global counterparts.

Europe, on the other hand, faces limited potential for further positive performance, she said, given its sensitivity to global trade tensions and economic headwinds.

And China’s recovery will remain challenging, despite recent government stimulus efforts. 

“We think that stimulus package [fell] short of what’s required to resolve a pretty vicious cycle [of] low inflation, excessive indebtedness, weak consumer confidence, home-price deflation and rising unemployment,” Alba said.

Alba is constructive on fixed-income investments, particularly as interest rates are expected to decline. 

“Although bonds carry the risk of selling off when interest rates rise, we’re entering an environment of declining rates,” she said. “And that should provide a price lift, as interest rates do come down.”

Higher yields compared to the past decade also create an attractive entry point for investors, she said. 

“The higher yield level today … means that there’s more of a buffer on returns through the coupons investors receive, which should provide a lift in times of economic and market weakness,” she said.

Inflation remains a factor, she noted.

“We saw bond markets reflect reset expectations that priced in higher-for-longer interest rates than would have otherwise been the case,” she said. 

Until markets regain confidence in inflation control and economic stability, she said volatility is expected to persist. Given the uncertainty, Alba stresses broad diversification across asset classes, geographies and investment styles. 

“We can’t prevent a storm if it comes, but we can be positioned for it,” she said. “History demonstrates that a portfolio with a broad mix of stocks and bonds tends to outperform cash, and also outperform portfolios that try to time markets throughout the cycle.”

This article is part of the Advisor To Go program, sponsored by CIBC Asset Management. The article was written without input from the sponsor.