At the start of the year, Pictet Wealth Management delivered its outlook for the 2025 financial year, as Donald Trump returns to the White House.
‘Despite the current turbulence, our vision remains generally optimistic,’ reports Frédérik Ducrozet, strategist at Pictet WM. ‘The economic situation in the United States remains buoyant with the America First plan and the good inflation figures,’ he adds.
The specialist points out that the fears of recent months already seem far away: this summer again, a disappointing report on employment in the United States was enough to worry the markets and raise the specter of a possible recession…
If optimism is therefore reasonably in order, the speakers nevertheless remain suspended from the measures of the Trump administration – and sometimes disconcerted by declarations as unexpected as they are worrying regarding Washington’s views on Greenland, the Panama Canal or even the Canada.
Furthermore, the thorny issue of exorbitant customs duties, a threat regularly brandished by the Republican, remains unresolved. ‘At Pictet WM, we do not think that Trump can impose duties of 20% on all imported goods and on the whole world,’ assures Frédérik Ducrozet.
‘Even though he has said he wants to revolutionize the way taxes are collected, he will instead use this leverage as a negotiating tool. He will also be confronted with a reality principle and this is what is currently holding the markets. ‘
Pictet WM thus recalls that the Republicans have a narrow majority in Congress and that the mid-term elections are scheduled for 2026. In this context, the bank believes that any measure that is too penalizing or too radical on the budgetary level would risk putting hurt the Republican majority in the House.
‘Let’s not forget that we are talking about a country which has a deficit of more than 6% per year and that a third of its debt must be refinanced over the next twelve months’, argues the specialist who estimates that in these circumstances, some Republicans may not support the most radical Trumpist measures.
Pictet WM also raises a paradox: while Donald Trump can attribute part of his victory to the discontent caused by inflation in the United States over the last three years, the measures he proposes, both in terms of human rights customs, taxation, immigration or deregulation are for the most part… inflationary!
‘If the measures it adopts are too extreme and revive inflation, we risk seeing bond rates rise while the Fed will no longer be able to lower its own. It is a principle of reality that he will have to face and he will then have to quickly return to something more reasonable,’ anticipates Frédérik Ducrozet.
Especially since even if they remain in a weak position, China and Europe can also apply retaliatory measures which could impact the American economy.
In view of the situation, Pictet WM expects an average customs duty level of 5%, although Beijing could find it difficult to escape the 20% promised by Trump.
-Furthermore, while the Republicans promised a reduction in the tax rate from 21% to 15% on companies producing in the United States, Pictet WM anticipates the adoption of a rate of 18%, estimating that the reduction would otherwise be ‘too costly or politically difficult to implement’.
Finally, if the Trump/Musk duo aimed for a saving of 2,000 billion on the federal budget – thanks to a new department dedicated to government efficiency – this would be largely overestimated, according to Pictet WM. Thus, ‘if we reached 500 billion over 10 years, it would already be the end of the world’, Frédérik Ducrozet believes.
Pictet WM thus anticipates a deceleration in American GDP, going from 2.7% in 2024 to +2.3% in 2025, while global GDP would go from 3.1% in 2024 to 3.2% in 2025 For the euro zone, Pictet WM anticipates growth of 1% in 2025, compared to 0.9% in 2024.
In this context, the bank forecasts a 50 bp cut in Fed rates in 2025 and 125 bp for the ECB.
Finally, Frédérik Ducrozet spoke of the ‘degraded’ situation in France. ‘Personally, the debt does not worry me in itself,’ says the specialist, who instead points to the question of potential long-term growth.
As such, Pictet WM highlights ‘three pressing issues’ on which action should be taken this year, at the risk, according to the bank, of seeing growth prospects deteriorate again.
‘The first is Ukraine. Europe must be on the front line to negotiate the conditions for maintaining security, so that our defense resources are implemented and serve everyone,’ says the expert.
Frédérik Ducrozet also discusses energy policy, which appears to be a disadvantage compared to the USA. “Measures have been taken, but we are not there yet,” he insists.
Finally, Pictet WM suggests the establishment of a capital market: ‘The big banks and the big champions elsewhere should be able to merge and form European banks which are able to finance businesses. The options are on the table, but political leadership is still lacking. ‘
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