The barrage of 2025 outlook reports from banks and investment houses has left FT markets columnist Katie Martin feeling weary. These reports all seem to echo the sentiment of “American exceptionalism,” despite concerns about President Trump’s policies and overvalued US stocks. Martin worries that if this narrative falters, everyone will rush to change their investment strategies simultaneously.
At the FT’s London headquarters, the Money section hosted its annual investment roundtable to discuss what retail investors should focus on in the coming year. The panel, including experts like Alix Stewart, Salman Ahmed, Simon Edelsten, and Stuart Kirk, delved into topics like Trump’s tariffs, the state of US stocks, the future of UK equities, and even ventured into the realm of cryptocurrencies.
Ahmed’s analysis suggests a reflationary period for the US in 2025, with increased consumer spending and corporate earnings. He also highlights the potential impact of trade tariffs and the importance of monitoring Europe’s economic situation. Edelsten emphasizes the history of tariffs between the US and Europe, while Kirk remains optimistic about market reactions to tariffs.
Despite concerns about fiscal sustainability and the potential impact of tax cuts on the US deficit, investors like Stewart and Kirk remain largely unfazed. The panel acknowledges the elephant in the room – the question of fiscal sustainability and the potential risks to US institutions. Amidst the general consensus of a positive outlook, there are lingering concerns about institutional resilience. For instance, consider the nomination of Bessent mentioned earlier. “He was arguably the best choice among a questionable pool of candidates for that position,” she explains. “The market has responded positively to his nomination. However, he has previously suggested the idea of a ‘shadow Fed’. What purpose would a shadow Fed serve other than to undermine the actual Federal Reserve?”
While Trump’s ability to make significant changes to the Federal Reserve’s leadership or the Federal Open Market Committee is limited, Martin warns of a potential “low-level undermining” that could pose a problem, particularly in terms of dollar policy.
“It’s important to take these risks seriously because the story of American exceptionalism in U.S. equities relies on strong institutions to support it,” she emphasizes. “If you disrupt that narrative by interfering with the Fed or implementing unconventional dollar policies, the foundation of that story could crumble quickly.”
In terms of the U.S. stock market possibly being in a bubble, Kirk expresses concern about the exuberant sentiment surrounding risk assets. Drawing parallels to past bubbles in Japanese equities and the dotcom era, he questions whether the current valuations truly reflect the underlying fundamentals or if they are inflated by passive investing trends.
Edelsten notes that despite the expensive valuations of some American companies like Apple, he has never had so much exposure to the U.S. market in his global equity funds. This raises the question of whether the valuation reflects genuine growth potential or is a result of passive investing inflating a select few stocks.
Moreover, Kirk highlights the importance of understanding the difference between absolute and relative returns for retail investors. While fund managers focus on relative performance to avoid underperformance, individual investors can still achieve growth by diversifying across different regions and asset classes.
Looking at opportunities in the UK market, Kirk sees value in good-value, shareholder-focused companies with high return on invested capital outside of the top 10 or 20 well-known companies. Edelsten points to potential growth in UK banks, Experian, and RELX, emphasizing the latter’s position as a leader in providing AI-powered legal solutions.
The impact of the Labour Budget on UK growth remains uncertain, with some in the City expressing disappointment and hoping for more radical measures to stimulate growth. Ahmed sees potential in improving the UK’s relationship with the EU, suggesting that a different approach could yield positive results.
Martin predicts a wave of IPOs in the UK next year, with Shein, a Chinese fast-fashion giant, being one of the most anticipated listings. The success of IPOs in the UK is crucial, as a few bad deals at the beginning can disrupt the market. China’s economy is facing challenges, but potential growth could lead to significant gains in European investments. The European market is undervaluing the potential for positive developments in Ukraine. While the US focuses on tax cuts, Europe is moving towards fiscal austerity. Cryptocurrency remains unpredictable, with the possibility of significant price fluctuations. It’s important to be cautious when investing in this volatile market. sentence: This is the best movie I have ever seen in my life. sentence to be more concise: “Please rewrite the sentence.”