01/13/2025

The beginning of 2025 has made it clear that global economies are facing a climate full of contrasts and complexities. While some countries are showing signs of resilience, others are struggling to restart growth and control inflationary pressures. This divergent outlook presents both significant opportunities and risks for investors, and raises crucial questions about the direction of the global economy.

In the United States, recent economic data has reinforced the narrative of a robust economy. The December jobs report far exceeded expectations, with 256,000 new jobs created and the unemployment rate dropping to 4.1%. These figures underscore the strength of the labor market, though they also raise concerns among investors, who view these results as a hurdle to potential easing of the Federal Reserve’s monetary policy.

The dollar continued its upward trend, driven by favorable real interest rate differentials compared to other developed economies. This strengthening not only reflects confidence in the U.S. economy, but also expectations that the Federal Reserve will maintain a restrictive stance for much of 2025. Although a single rate cut is expected in June, this will depend on data developments, with current conditions not suggesting a rapid shift toward a more accommodative monetary policy.

On the political front, the Trump administration has once again generated uncertainty. Statements about implementing broad tariffs, including on critical products in global supply chains, have increased volatility in global markets. Additionally, Trump hinted at unilateral actions to bolster the U.S. economic presence in Canada and other regions, prompting criticism from both allies and competitors. In the energy sector, the administration has prioritized oil and gas production, a decision that could heighten tensions with countries more focused on the energy transition.

In Europe, the economic outlook remains less encouraging. The eurozone economy closed 2024 with quarterly growth of 0.1%, reflecting a persistent slowdown in the manufacturing sector. Germany, in particular, is facing sustained declines in industrial orders, although production showed a slight uptick in November.

As for inflation, the overall index rose to 2.4% year-on-year in December, driven mainly by higher energy prices. However, core inflation remained stable at 2.7%. This balance between headline and core inflation reinforces expectations that the European Central Bank will continue to cut rates gradually throughout 2025. The deposit rate could reach 2.5% by March, though any further adjustments will depend on the evolution of economic data.

China, the world’s second-largest economy, is facing a challenging economic environment. Consumer inflation was just 0.1% year-on-year in December, while producer prices remained in negative territory, falling by 2.3% year-on-year. These figures highlight the deflationary pressures weighing on the Chinese economy, even as the central bank has adopted more lax monetary policies to boost activity.

The yuan is also under pressure, depreciating to its lowest levels against the dollar. This limits the central bank's ability to lower interest rates further, as a weaker yuan could exacerbate capital outflows and undermine investor confidence. Despite these challenges, fourth-quarter GDP is estimated to have grown by 5.0% year-on-year, driven by moderate exports and a slight recovery in industrial production.

Finally, Japan entered 2025 with relative optimism, supported by economic growth driven by domestic consumption and a 5% wage increase—the highest in three decades. However, the Bank of Japan faces a policy dilemma. Although it is expected to raise interest rates in March and October, uncertainties related to U.S. trade policies and domestic political tensions could influence its decisions.

The start of 2025 has made it clear that global economies face divergent challenges. While the U.S. and Japan demonstrate economic resilience, Europe and China are struggling to sustain growth and address inflationary and deflationary pressures, respectively. For investors, the global outlook offers both risks and opportunities. The key to navigating this environment will be to keep a disciplined perspective, diversify appropriately, and closely monitor economic and political trends that could influence the markets in coming months.