2025 growth stalls as rate cuts disappoint, inflation lingers
OVERVIEW Global growth forecasts have contracted to 2.3%, well below pre-pandemic trends. Central banks face a hawkish bind: inflation remains sticky at 3-4% in developed markets while labor markets soften. The synchronized playbook of 2024—rate cuts driving asset recovery—is fracturing across regions. KEY SIGNALS The ISM manufacturing PMI dropped below 48 for three consecutive months. Fed futures now price only two cuts through 2025, down from four predicted last summer. European banks are reporting margin compression while emerging markets face capital flight from higher-for-longer US rates. WHAT TO WATCH Monitor Q1 earnings revisions—consensus estimates haven't repriced downward enough. Treasury yield inversions are normalizing, but credit spreads widening. NYC investors should recalibrate portfolio hedges: defensive sectors and hard assets outperforming; private credit and real estate debt face duration risk if defaults accelerate in 2025.
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