Investment Outlook: Loomis Sayles

Highlights

• Macro Drivers: Regionally, 2025 economic growth rates may vary widely. We expect the US to once again outpace other developed market countries. Inflation data is progressing closer to long-run target levels and we think that will continue. We believe the Federal Reserve will undertake four 25-basis-point cuts in 2025, while the US labor market is likely to soften at the margin. Euro-area inflation should come down faster than the US because demand is much less robust.
  
  
• Corporate Credit: US investment grade and high yield corporate credit look attractive as we anticipate limited downgrades and a very mild default rate of approximately 3.2%. Our credit research team suggests 93% of Bloomberg US Aggregate Index industries are in the expansion phase of the credit cycle. Yields across global credit markets appear attractive and we believe they could drift lower as central banks pursue cutting cycles.
  
  
• Currencies: Short-term interest rate differentials are less likely to influence US dollar performance. Relative economic growth, trade policy, risk appetite and expected performance of US assets could buoy the US dollar in the near term. We remain cautious on China, but view upside economic surprises as possible. We believe Latin America and South Africa are attractive regions to add foreign exchange exposure.
  
  
• Global Equities: The MSCI Europe Index could rebound from flat growth to a mid-single-digit pace in 2025. The S&P 500 Index and MSCI Emerging Markets Index are expected to grow earnings by more than 10%. We are conservatively positive about corporate earnings growth relative to consensus. Annual total returns are more likely to be in line with the rate of earnings growth that the S&P 500 Index delivers. In global indices, trailing PE multiples are slightly beneath their five-year averages.