@AXAIM.
A strong US economy and market, alongside benign economic conditions in Europe and other developed markets, have helped insurers strengthen their balance sheets and boost their investment earnings while restoring liquidity buffers.
However, looking towards 2025, there is no shortage of political, geopolitical and economic uncertainty.
Donald Trump’s re-election as US President could be a gamechanger for financial markets. While there is uncertainty around the new administration’s ability to execute its campaign promises in full, these promises are viewed as inflationary - and being priced in as such by the market.
Supply shocks from a potential labour shortage and tariffs, combined with sustained fiscal stimulus, might put pressure on prices and force the Federal Reserve to maintain a certain level of financial restriction. This, in turn, could dampen the US growth outlook, although from an above trend level, and have repercussions for Europe, China, and the broader emerging market world.
Meanwhile, Europe is now facing gloomier economic conditions, marked by concerns over France’s public deficit, fiscal tightening, and energy costs and broader business model issues for Germany. This should convince the European Central Bank to significantly ease monetary conditions, which could support the region’s 2025 growth outlook – albeit with potentially significant downward risks on the radar.
