In the first edition for 2025 of Construction Magazine, Milestone Advisory’s Darragh Hogan delves into the key themes of 2024, their implications, and the outlook for the year to come.
2024 has been a year of intriguing developments and market surprises. As we close the chapter on this year, investors and policymakers alike are shifting their focus to what lies ahead in 2025.
2024: Navigating Market Volatility and Surprises
The global economy in 2024 demonstrated resilience, particularly in the United States, which continues to drive global growth. Following the U.S. elections, markets responded favourably to the pro-growth agenda of the new administration, sparking a rally in U.S. equities to record highs. Factors such as anticipated fiscal stimulus, deregulation, and the beginning of a rate-cutting cycle bolstered investor confidence. Meanwhile, the dollar strengthened as expectations of fewer Federal Reserve rate cuts took hold. In Europe, however, the picture was more subdued. Economic growth is projected at just 0.8% for the year, reflecting challenges in manufacturing, weak Chinese demand, and lingering effects of the energy crisis. Nevertheless, consumer confidence showed signs of recovery following the real income shocks of previous years.
Inflation, which has dominated monetary policy since 2021, took a back seat as the primary concern in 2024. Disinflationary trends began to take hold, driven by falling energy prices and easing supply chain pressures. However, looming tariffs, if enacted fully, could push U.S. inflation up, potentially influencing future Federal
Reserve decisions.
Central banks have also adjusted their course. The European Central Bank (ECB) cut rates by 75 basis points year-to-date, with further reductions likely in 2025 as Europe grapples with its growth challenges. Similarly, the Federal Reserve initiated rate cuts but has adopted a cautious stance, waiting to assess the impact of new policies on growth and inflation.
Sector Highlights and Fixed Income Trends
From an equity perspective, 2024 has been defined by strong corporate earnings, improved growth expectations, and thematic drivers such as artificial intelligence. While equities appear fully valued, their upward trajectory underscores a collective belief in positive economic and earnings growth over the medium term.
Fixed income markets presented a mixed picture. Bond yields fell in Europe, reflecting expectations of prolonged monetary easing. In contrast, U.S. yields rose amid inflationary concerns tied to potential tariffs and fiscal stimulus. This divergence underscores the varying growth and policy dynamics across regions.
2025: Cautious Optimism with Key Risks
As we look towards 2025, the global economy’s trajectory appears cautiously optimistic. Key themes include:
- Monetary Policy Adjustments: Central banks are likely to continue rate cuts. The ECB is expected to remain aggressive, given Europe’s weak growth outlook. Meanwhile, the Federal Reserve will adopt a measured approach, aligning its policies with inflation and growth data.
- Growth Over Inflation: With inflationary pressures moderating, growth is back at the forefront. The U.S. is projected to maintain robust growth, supported by resilient consumer spending and a strong labour market. European growth will likely remain muted but stable, with improvements contingent on policy support and geopolitical stability.
- Opportunities in Equities and Fixed Income: Equity markets, while fully valued, remain supported by the prospect of lower rates, easing inflation, and earnings growth. Fixed income investors should focus on opportunities in European nominal bonds, particularly as yields decline further.
- Geopolitical and Policy Risks: The global growth outlook faces risks from potential restrictive trade policies, geopolitical tensions, and the timing and magnitude of fiscal measures. For instance, tariffs could dampen growth in Europe and China while fuelling inflation in the U.S.
Conclusion
The year 2025 holds promise, provided growth remains steady, inflation continues its downward trajectory, and central banks maintain accommodative policies. While equities appear fully valued, a combination of positive growth, falling inflation, and the AI-driven economic revolution could create further upside.
Investors should remain mindful of risks such as geopolitical tensions, inflationary surprises, and growth slowdowns. Nonetheless, the fundamental backdrop remains supportive, with ample opportunities across asset classes for those who navigate the market with a strategic and informed approach.
At Milestone Advisory, we are committed to providing tailored financial guidance to help you achieve your long-term goals. As always, we remain focused on your financial success in an evolving economic landscape.
HERE TO HELP YOU NAVIGATE YOUR WAY TO FINANCIAL SECURITY.
The Milestone Advisory team are qualified financial services consultants. We specialise in helping professionals in the construction sector and related industries.
Our team will work with you to review your finances, explaining your options in clear English.
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FOR MORE INFORMATION, CONTACT DARRAGH HOGAN (DARRAGH@MILESTONEADVISORY.IE).
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