Every financial journalist is inundated with emails as the year end approaches with predictions and outlooks for the coming year. It can be overwhelming, but generally speaking these are helpful and extensive documents that forecast the markets — and the likely focus of news articles.
With Donald Trump’s inauguration towards the end of January, the middle east poised for war and the industry eagerly anticipating a new era of deregulation, 2025 is primed to be a blockbuster.
So to make the task of making sense of the outlooks of the largest asset managers a bit simpler, we engaged ChatGPT.
Putting geopolitics and economic forecasting to one side for a second, there is one thematic priority that sticks out: artificial intelligence. (Readers can decide for themselves whether ChatGPT shows bias.)
AI is being touted as a structural game changer for all industries the likes of which we haven’t seen since the invention of the internet, massively improving efficiency and productivity for those that are able to effectively harness it.
Blackrock, Vanguard, and several others indicate that there are continued opportunities for investment into AI, including in semiconductors, data centers, and energy-solutions.
Of course, the firms highlight that there are potential pitfalls, currently overvalued stocks for one. The stock price of best in show Nvidia has shown miraculous growth, but it could well be due for a correction, for example, and potential regulatory risks also are worth considering.
Consensus is that AI is a transformational force to be reckoned with. With that in mind, Institutional Investor fed ChatGPT the outlook reports of the ten largest asset managers — BlackRock, Vanguard, State Street Global Advisors, Fidelity Investments, Capital Group, Amundi, PIMCO, Franklin Templeton, Invesco, and T. Rowe Price — and asked the AI what it thought. First, we asked for summaries of the outlooks to condense the hundreds of pages of information and data they contained. Following that we asked the machine to summarize the summaries and create one master outlook for 2025.
What we are publishing below is simply an example of the power of ChatGPT and some useful information to frame 2025. There were some holes that the machine chose to ignore, for example, that PIMCO did not yet release a straight outlook document.
When asked, ChatGPT admitted its own weaknesses: “The summaries and comparisons I provided are based on the insights from the respective investment outlooks and the publicly available information from the documents and sources referenced. However, since I couldn’t directly access the full content of all reports (due to some links being restricted or unavailable), parts of my analysis rely on secondary summaries and publicly accessible sections of those reports.”
So, when reading the unedited information below, please bear in mind that this is an exercise and that some of the information may not be entirely accurate. Not something a publication ever tends to admit, but that is the world we live in these days.
That is enough from us. Happy holidays and see you all next year!
Outlook 2025
The first thing we asked the machine to determine, is if there were any common themes across outlooks. This is what the AI sent back:
1. Soft Landing Scenario
Most managers anticipate a soft landing for the global economy, where inflation moderates, and growth slows but avoids a severe recession. This scenario is supported by:
- Central Banks Easing Policies: Nearly all firms predict a transition from restrictive to neutral or accommodative monetary policies in 2025 as inflation comes under control.
- Inflation Stabilization: Consensus suggests inflation will hover near central bank targets (around 2 to 3 percent), though some warn of lingering risks.
2. Positive Outlook for Risk Assets
There’s a broadly optimistic sentiment toward risk assets like equities and credit markets, driven by:
- Easing Monetary Policies: Lower rates are expected to fuel risk appetite and support valuations.
- Sector-Specific Growth Drivers: AI, clean energy, and healthcare innovation are highlighted as transformative themes across sectors.
3. Diversification Imperative
All providers emphasize the need for diversified portfolios to navigate a world of uncertainties:
- Regional diversification across developed and emerging markets.
- Allocation across equities, fixed income, and alternative assets.
- Inclusion of thematic investments like AI, sustainability, and healthcare.
4. Emerging Market Opportunities
Emerging markets, particularly in Asia, are widely viewed as areas of potential outperformance due to:
- Favorable Demographics: India, Indonesia, and other Asian economies are set to benefit from structural reforms and digital transformation.
- Valuation Appeal: Emerging markets offer better valuations compared to developed markets.
Perhaps the most interesting part of the exercise is when we asked the machine to examine the points of divergence between the documents.
1. Inflation and Central Bank Policies
- Fidelity adopts a more cautious stance, suggesting inflation may plateau or even reaccelerate due to persistent wage pressures and geopolitical factors like tariffs.
- BlackRock and PIMCO are more optimistic, projecting a steady decline in inflation with central banks cutting rates gradually.
- Amundi highlights risks from geopolitical fragmentation that could cause inflationary pressures to persist, especially in Europe.
2. Regional Focus
U.S. Dominance vs. Global Diversification:
- BlackRock maintains a strong overweight on U.S. equities, particularly in sectors like technology and AI.
- Vanguard and Amundi see more opportunities outside the U.S., especially in undervalued regions like Europe and emerging Asia.
- Japan and South Korea: Capital Group and T. Rowe Price are particularly optimistic about structural reforms and recovery in Japan and South Korea, which receive less attention from other providers.
3. Equity Market Preferences
- Growth vs. Value Stocks:
BlackRock continues to favor U.S. mega-cap growth stocks, particularly those tied to AI and innovation.
T. Rowe Price and Capital Group advocate for value stocks, including small- and mid-caps, as a way to balance portfolios and tap into broader market opportunities.
4. Sector Priorities
- Healthcare Innovation: T. Rowe Price and Capital Group identify healthcare as entering a “golden age,” presenting significant investment opportunities.
- Clean Energy: Amundi and SSGA emphasize investments in green energy transition as a central theme.
5. Fixed Income Outlook
High-Quality Bonds vs. Riskier Credit:
- PIMCO and Vanguard are particularly bullish on government bonds and high-quality fixed income, citing attractive yields and defensive benefits.
- Amundi and SSGA see opportunities in high-yield and emerging market debt but caution about volatility and currency risks.
Duration Strategy
- BlackRock advises caution on long-duration bonds due to inflation risks.
- Others, like PIMCO, highlight opportunities in the mid-duration segment.
6. Emerging Markets
- Vanguard, Amundi, and Franklin Templeton are bullish on emerging markets, particularly Asia, citing favorable demographics and growth potential.
- PIMCO and SSGA acknowledge opportunities but stress caution due to policy volatility and geopolitical risks.
7. Alternative Investments
- BlackRock and Amundi stress the importance of alternatives like real estate, infrastructure, and private markets for diversification.
- PIMCO places significant emphasis on commodities, particularly gold, as a hedge against market volatility.
Each manager offered a number of strategic recommendations:
Stay Diversified:
- Balance U.S. equities with opportunities in Europe, Japan, South Korea, and emerging markets.
- Incorporate a mix of asset classes, including equities, high-quality fixed income, and alternatives.
Focus on Themes with Long-Term Growth Potential:
- Artificial Intelligence: Highlighted as a transformative driver of productivity and growth.
- Healthcare Innovation: Identified as entering a period of major advances.
- Sustainability and ESG: Clean energy and infrastructure investments align with global transitions to a low-carbon economy.
Be Cautious but Opportunistic:
- Monitor inflation and central bank policies closely, as premature easing or geopolitical disruptions could change the landscape.
- Focus on quality in both equities and fixed income to navigate potential volatility.
Adjust Regional and Sector Allocations Dynamically:
- Consider overweighting emerging markets, particularly in Asia, while remaining aware of risks.
- Balance growth and value stocks depending on regional valuations and sector dynamics.
And as a final kicker, we asked the machine how the firm’s predictions for this year panned out. Here’s a firm-by-firm breakdown of how their 2024 predictions aligned with actual outcomes:
BlackRock
Prediction:
- Highlighted AI and clean energy as transformational investment themes.
- Favored U.S. equities, particularly tech giants and mega-cap stocks, due to their innovation edge.
- Suggested caution on long-duration fixed income due to persistent inflation risks.
- Expanded into private credit and infrastructure investments, predicting a surge in demand.
Outcome:
- AI and clean energy continued to dominate investment themes, validating their long-term thesis.
- U.S. tech stocks (the “Magnificent 7”) outperformed, aligning with their overweight stance on mega-caps.
- Inflation stabilized but remained slightly above pre-pandemic levels, validating their cautious fixed income approach.
- Private credit and infrastructure investments saw significant inflows, benefiting from BlackRock’s early positioning.
Vanguard
Prediction:
- Emphasized balanced portfolios with a tilt toward fixed income due to attractive yields.
- Recommended diversifying outside the U.S. into undervalued European and emerging markets.
- Projected moderate U.S. growth and declining inflation.
Outcome:
- Fixed income performed well due to stable yields and expectations of central bank rate cuts, validating Vanguard’s strategy.
- European markets underperformed expectations, though select emerging markets (India, Indonesia) matched their bullish outlook.
- Inflation declined steadily, aligning with their broader macro predictions.
SSGA:
Prediction:
- Forecasted inflation easing and rate cuts creating opportunities in fixed income and small-cap equities.
- Highlighted transformative themes like AI and infrastructure for long-term growth.
- Advocated for moving beyond traditional 60/40 portfolios, incorporating alternatives.
Outcome:
- Inflation eased, and fixed income provided solid returns, aligning with their outlook.
- Small-cap equities lagged large-cap tech, falling short of expectations.
- Alternatives like infrastructure and commodities gained traction, validating their push for diversification.
Fidelity
Prediction:
- Warned inflation could plateau or reaccelerate due to persistent wage pressures and geopolitical risks like tariffs.
- Maintained a cautious stance on long-term bonds and overly optimistic equity valuations.
- Highlighted sectoral shifts favoring healthcare and infrastructure investments.
Outcome:
- Inflation largely stabilized, though it did not reaccelerate as Fidelity had warned.
- Long-term bond yields saw volatility, justifying its cautious approach to fixed income.
- Healthcare outperformed due to innovations in biotech and diagnostics, validating its sectoral focus.
Capital Group
Prediction:
- Advocated for diversification into mid-caps and emerging markets.
- Highlighted Japan and South Korea as undervalued opportunities due to structural reforms.
- Projected strong returns from healthcare and industrial sectors.
Outcome:
- Mid-cap stocks showed moderate gains, though large-cap tech dominated markets.
- Japan and South Korea showed resilience, benefiting from corporate governance reforms and industrial recovery, aligning with its predictions.
- Healthcare innovation delivered robust returns, especially in biopharma, validating its focus.
Amundi
Prediction:
- Expected a global slowdown in early 2024, with recovery driven by emerging markets, especially Asia.
- Forecasted disinflation trends to persist, though geopolitical risks could disrupt supply chains.
- Emphasized clean energy and infrastructure investments as key themes.
Outcome:
- Asia delivered mixed results: India and Indonesia outperformed, but China lagged due to structural issues, partly validating its emerging market focus.
- Disinflation persisted, but geopolitical disruptions (e.g., U.S.-China tensions) added volatility, aligning with Amundi’s caution.
- Clean energy investments grew significantly, reinforcing its thematic emphasis.
PIMCO
Prediction:
- Focused on high-quality fixed income (government bonds and mortgage-backed securities) due to expected rate cuts.
- Expressed caution on corporate credit spreads, anticipating volatility in riskier debt markets.
- Predicted a global slowdown but avoided recession, with monetary easing to support growth.
Outcome:
- High-quality bonds performed well as inflation eased and rate cut expectations grew, validating its strategy.
- Corporate credit saw tighter spreads, as PIMCO predicted, though defaults remained low, reflecting solid fundamentals.
- The global economy avoided recession, and central banks began hinting at policy easing, aligning with its predictions.
Franklin Templeton
Prediction:
- Bullish on emerging markets, particularly Asia, due to favorable demographics and fiscal policies.
- Highlighted AI and ESG as transformative investment themes.
- Recommended global diversification into undervalued markets.
Outcome:
- Asia delivered selective outperformance, especially in India and Indonesia, matching Franklin Templeton’s optimism.
- AI and ESG themes gained traction globally, reinforcing its thematic calls.
- Diversification into undervalued markets (e.g., Europe) produced mixed results, with Europe underperforming expectations.
Invesco
Prediction:
- Anticipated broader market participation beyond U.S. mega-caps, with opportunities in small-cap and emerging markets.
- Highlighted the potential for a late-year rebound in China driven by fiscal stimulus.
- Positioned for AI-related growth in sectors beyond technology.
Outcome:
- U.S. mega-caps continued to dominate, while small-cap and emerging market equities underperformed earlier expectations.
- China’s fiscal measures had limited impact, leading to slower-than-expected recovery.
- AI drove growth across sectors, supporting its thematic positioning.
T. Rowe Price
Prediction:
- Recommended value stocks and small-caps for diversification against the dominance of large-cap tech.
- Highlighted Japan and South Korea as beneficiaries of structural reforms and industrial recovery.
- Emphasized healthcare innovation as a key growth area.
Outcome:
- Small-cap and value stocks underperformed large-cap tech, though select areas delivered moderate gains. Japan and South Korea performed well, validating its regional focus.
- Healthcare continued to grow, especially in biotech, aligning with its thematic call.
Finally, here is a short summary of outcomes:
- Accurate Predictions: AI, clean energy, and healthcare were widely successful themes, aligning with most firms’ outlooks.
- Challenges: Overoptimism in small-cap and emerging markets occurred for some firms, while others correctly highlighted selective risks.
- Strongest Calls: BlackRock and Vanguard on U.S. equities; PIMCO on high-quality fixed income; T. Rowe Price on healthcare innovation.
