As we approach the midpoint of 2025, the global economic landscape continues to present a mixed tapestry of recovering growth, persistent inflationary pressures, and divergent monetary policies across major economies. This mid-year update from Crestrado offers our quantitative perspective on these key themes and their potential implications for various asset classes.
Global Growth: A Divergent Path
Our models indicate a continued, albeit uneven, global economic recovery. While some regions exhibit robust growth driven by strong domestic demand and recovering service sectors, others face headwinds from geopolitical uncertainties, supply chain normalizations that are still in progress, and the lagged effects of aggressive monetary tightening.
- United States: We project a moderation in US growth for H2 2025, with consumer spending potentially softening as excess savings dwindle and labor market conditions cool slightly. The risk of a mild recession remains, though our base case is for a soft landing.
- Eurozone: Growth is expected to remain subdued, hampered by energy price volatility and structural challenges. However, fiscal support measures and a resilient labor market may prevent a deep downturn.
- China: Economic activity is showing signs of stabilization, supported by policy easing. The property sector remains a key vulnerability, but broader industrial and consumer activity is improving.
- Emerging Markets: Performance will likely vary significantly, with commodity exporters benefiting from relatively firm prices, while others face challenges from global tightening and domestic inflation.
Inflation and Monetary Policy: The Tightrope Walk
Inflation remains a central concern for policymakers. While headline inflation has peaked in many advanced economies, core inflation proves stickier, driven by services and wage pressures. Central banks are navigating a delicate balance between taming inflation and avoiding an undue economic slowdown.
Our view is that major central banks, including the Federal Reserve and the ECB, will maintain a hawkish stance for longer than currently priced by markets, with rate cuts likely delayed until well into 2026, or even later if core inflation does not recede significantly. This implies a "higher for longer" interest rate environment.
Commodity Markets: XAU, XAG, and Oil
Gold (XAU/USD) & Silver (XAG/USD): Precious metals have seen significant volatility. While gold benefited from safe-haven demand and central bank buying, its recent rally appears overextended relative to real yields and the US dollar strength. We anticipate a potential consolidation or corrective phase for gold. Silver, while also influenced by industrial demand, may follow gold's trajectory in the near term, though its longer-term outlook remains supported by green energy transition demand.
Oil (WTI/Brent): Crude oil prices are expected to remain supported by OPEC+ supply discipline and recovering demand from China. However, global growth concerns and potential increases in non-OPEC supply could cap significant upside. Our models suggest a trading range with a slight downward bias if recessionary fears intensify.
Investment Implications
In this environment, Crestrado emphasizes a disciplined, data-driven approach to portfolio construction:
- Fixed Income: Given the "higher for longer" rate outlook, shorter-duration fixed income and quality credit may offer better risk-adjusted returns.
- Equities: A selective approach is warranted. Focus on companies with strong pricing power, resilient earnings, and healthy balance sheets. Value and quality factors may outperform growth in a slower economic environment.
- Alternatives: Real assets and certain alternative strategies could offer diversification benefits and inflation hedging.
Navigating the second half of 2025 will require active management and a keen understanding of evolving macroeconomic signals. Crestrado's quantitative models are continuously updated to reflect the latest data and market dynamics, aiming to identify opportunities and manage risks effectively.
Disclaimer: This article represents Crestrado's perspective based on current analysis and is for informational purposes only. It should not be construed as investment advice or a recommendation. Past performance is not indicative of future results. Investing involves risk, including the possible loss of principal. Market conditions can change rapidly.