2025 Market Outlook: Macroeconomic Overview
As we enter the new year, we’re taking a moment to reflect on some of the critical themes that shaped the markets in 2024. These include geopolitics, evolving trade policies, and the shifting dynamics of the future of global energy. We anticipate that these factors will continue to play a significant role in influencing economic and market trends in 2025. Our focus remains on closely monitoring these developments to identify potential risks and opportunities as they emerge.
2025 Macroeconomic Overview
After another year of progressively moderating inflation across the globe, policymakers largely declared victory. However, certain developed markets, particularly the United States, continue to grapple with inflation that, while easing, remains stubbornly above the target 2% threshold.
Despite this persistent inflation, central banks in the US and other developed economies have begun to reduce interest rates. These institutions deserve recognition for navigating a challenging landscape; they have successfully maintained a relatively smooth economic trajectory, avoiding the much-anticipated recession. By effectively balancing their dual mandates of full employment and price stability, they have fostered resilience in many economies.
In contrast, Japan faced a different scenario as inflation emerged for the first time in many years, prompting the Bank of Japan to implement two rate hikes.
Globally, 2024 was also a year marked by elections, during which incumbents fared poorly. Some leaders returned with smaller majorities while others lost power entirely. Many populations appeared ready for a change from governments that managed the COVID-19 crisis and led through a period of high inflation.
Amidst these political and economic shifts, gold prices soared throughout 2024, driven by increased demand from developing nations. Rising deficits and escalating debt levels, alongside mounting interest payments, further intensified the appeal of gold as a safe haven in uncertain economic times.
Outlook
The anticipated return of President Donald Trump to the White House on January 20th carries the potential for significant policy changes through a series of executive orders. This inauguration marks the beginning of what promises to be a tumultuous and eventful year. Several key topics are expected to dominate economic and geopolitical discussions:
Tariffs and Trade
Global leaders should be expected to closely monitor how President Trump’s campaign rhetoric translates into policy decisions. The president has already signalled his intention to impose tariffs on Canada and Mexico unless decisive action is taken to curb the flow of illegal immigrants and drugs—including fentanyl—into the United States.
However, the scope of these tariffs may extend beyond North America. China is likely to be a primary target, with Europe potentially following.
It is critical to note that tariffs can serve as both a strategic tool and a blunt instrument. For instance, while some countries impose tariffs on American goods, the U.S. can use the threat of reciprocal tariffs as a powerful negotiating tactic. Observing how these strategies unfold will be essential to understanding their impact on international trade relations.
Geopolitical (In)Stability?
Ongoing conflicts in Eastern Europe and the Middle East continue 
to escalate, while the Red Sea and Suez Canal remain effectively closed to commercial shipping due to attacks on maritime vessels by Houthi forces in Yemen.
As 2025 progresses, a crucial question remains: will these conflicts find resolution? President Trump appears optimistic about his ability to broker deals, an outcome that aligns with U.S. interests seeking to shift focus towards East Asia. The recent appointment of Representative Mike Waltz as National Security Advisor and Senator Marco Rubio as Secretary of State—both known for their firm stance on China—indicates that addressing the challenges posed by Beijing will be a top priority in a new Trump administration.
Nuclear energy resurgence
Enthusiasm for nuclear power continues to grow among policymakers, financial institutions, utilities, and the broader public. This interest stems from recognizing nuclear energy’s potential to provide the clean baseload power necessary to meet the rising demands driven by AI data centers, electric vehicles and global GDP growth — all while adhering to net zero commitments.
The appeal of nuclear power is multifaceted: it enhances energy security through reliance on domestic or Western-aligned supply chains, fosters economic growth, and contributes to achieving zero carbon emissions. These factors position nuclear power as a critical player in the energy landscape, making it a focal point for future investment and development.
Download the full Empire Life 2025 Market Outlook (PDF).
This document reflects the views of Empire Life as of the date published. The information in this document is for general information purposes only and is not to be construed as providing legal, tax, financial or professional advice. The Empire Life Insurance Company assumes no responsibility for any reliance on or misuse or omissions of the information contained in this document. Please seek professional advice before making any decisions.
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Information contained in this report has been obtained from third party sources believed to be reliable, but accuracy cannot be guaranteed. Empire Life Investments Inc. is the Portfolio Manager of certain Empire Life segregated funds. Empire Life Investments Inc. is a wholly-owned subsidiary of The Empire Life Insurance Company.
January 2025
