Bank of America (NYSE:BAC) analysts identified 10 key macroeconomic themes for 2025 in a note Tuesday, predicting higher stocks, policy shifts and evolving market dynamics. Here are the highlights:
1. S&P 500 poised for gains
Bank of America expects the S&P 500 to reach 6,666 by the end of 2025, driven by 13% earnings growth.
They point out that 96% of companies are expected to achieve record EPS growth by Q4 2025, indicating a broad-based acceleration.
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2. US productivity boosts growth
Recent productivity gains are expected to boost growth, inflation, and monetary policy rates in the United States. However, they believe that “Trump Economics 2.0” may benefit the United States more than the rest of the world, with unusually large risks surrounding the outlook.
3. Stability of bond yields
The 10-year Treasury yield is expected to remain in a narrow range of 4-4.5%, ending the year at 4.25%.
4. Weakness of basic commodities
Excess supply and slowing demand, particularly from emerging markets, are expected to weaken commodities such as oil and grains.
5. The decline in the strength of the dollar
The dollar is expected to remain strong through the first half of 2025, but could weaken later as policy and growth uncertainties mount.
6. Emerging markets face challenges and opportunities
Bank of America says the imposition of tariffs may initially affect emerging markets, but a buying opportunity could arise once markets adjust, especially if the dollar tops out.
7. US Cyclical Stocks Lead the Way
US cyclical sectors are expected to outperform, supported by rising productivity, limited capacity and favourable policy changes.
