Market outlook 2025: Brokerages on opportunities, risks, investible themes

Emerging market equities are likely to post small gains in 2025 amid global policy uncertainties and a stronger dollar.

From the outcome of the general elections and then Union Budget to tepid corporate earnings in the September 2024 quarter (Q2-FY25), sticky inflation and Reserve Bank of India’s stance on interest rates, extreme weather conditions, Indian stock markets have braved it all in calendar year 2024.

At the global level, too, uncertainty surrounding the US presidential elections, geopolitical conflicts in West Asia, China’s stimulus to prop up its economy and the yen carry trade, the Indian markets were mostly resilient to these headwinds.

As they prepare to step into the calendar year 2025, what are the key risks and opportunities that investors need to be mindful of?

Here’s what leading brokerages said.

JP Morgan

Global equity markets should face a fluid backdrop with many cross-currents at the forefront.

The central equity theme for next year is one of higher dispersion across stocks, styles, sectors, countries, and themes. 2025 is set to be another year that calls for theme-driven opportunistic allocation to EM as opposed to benchmark investing.

Emerging market (EM) equities are likely to post small gains in 2025 amid global policy uncertainties, a stronger dollar, and less room for easing in EM.

Macroeconomic uncertainties, evolving geopolitical dynamics, and persistently high interest rates will test global stability.

We use our risk budget to focus on idiosyncratic investment cases with overweight rating (OW) on India and South Africa), beta to US exceptionalism (OW Mexico), gain exposure to the AI trade (OW Taiwan) and buy USD defensiveness (OW UAE).

Ashmore

Growth is likely to soften in 2025 towards 6.5 per cent, as sticky inflation and election-related delays in public spending led to softening urban consumption, with tight financing conditions also weighing in.

Because of softening growth and urban demand, Indian equities, after a four-year bull run have begun to de-rate in the past three months.

Rate cuts in 2025 would provide some support, which should be possible soon if food inflation moderates, which it normally does in winter as the weather stabilises.

Morgan Stanley

We are more confident in the outlook for earnings in India, ASEAN (Malaysia, Singapore and Indonesia) and South Africa versus Latam overall.

For 2025, emerging market (EM) equities are facing the triple challenge of an ongoing debt-deflationary challenge in China (with a hesitant policy response), the likely escalation of tariffs by a Republican administration and the negative impacts of this on global growth and EM FX rates.

We lowered our base-case price target for MSCI EM from 1,160 to 1,100, implying essentially zero returns.

In our Asia/EM Major 15 market allocation model, we retain our overweight stance on India - our most preferred market, Singapore, Japan, Australia, South Africa and Malaysia.

Julius Baer

In a multipolar world characterised by opportunistic manoeuvring on the geopolitical stage that keeps macroeconomic and financial market volatility high, it is better for investors to focus on capital markets where the playing field is familiar, and where the rules of the game are stable and known.

In this sense, even though we do not see a full-blown deglobalisation with unconditional reshoring activities coming into play, we reiterate our view that store-of-value equity markets should profit.

We use this as an umbrella term for markets in countries where shareholder value and property rights are well protected and there is a strong institutional framework, sound governance, and efficient allocation of capital.

Our preferred examples are the US, Sweden, and Switzerland, all of which have an exceptional track record of shareholder value creation.

We have reintroduced a strategic allocation to gold in portfolios because of the structural demand from non-Western investors for liquid assets that diversify their portfolios away from those assets that are potentially at risk of Western government sanctions.

While government bonds may look attractive from the outset, equities remain our preferred asset class strategically.