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This week we look at what global investment banks are saying about the upcoming year for investment markets. To throw in a bit of extra spice, we thought that we would employ the services of something we have discussed continually with our clients throughout 2024: artificial intelligence. We asked ChatGPT (a leading artificial intelligence provider of essay-like information) to summarise the outlooks for the main investment banks for 2025, which we show below.

Chat GPT made a good effort at the document and is reasonably accurate in its summary of investment banks predictions, although a bit technical in its speech for our liking (preferring plain English for accessibility). This is the type of task that ChatGPT excels at, where there are numerous documents already produced by humans on the Internet, which it could then summarise in a human like, storytelling manner.

However, it does also illustrate the shortcomings of this type of “artificial intelligence”. This artificial intelligence really isn’t intelligent at all in the way that humans would understand it but just extremely good at guessing the next word in the elaborate game of Blankety Blank (for those who remember the old game show). It then builds on each guessed word to make a summary of other articles on the Internet that looks like an original work.

It also demonstrates a new psychological term known as “uncanny valley”. This psychological phrase refers to the human ability to be able to spot things that are human-like but not actually produced by humans. We think this article illustrates that quite well because, upon careful reading by those well versed in investment reporting, it is quite apparent that the document is not actually written by a human. Nonetheless, it does provide a useful summary of market predictions for 2025.

One other point of caution: both a human and artificial intelligence review of global investment banks predictions for 2025 reveal a startling degree of consistency. Commentators are largely united in thinking 2025 will be a positive year for most markets. This is reminiscent of 2023, where predictions were largely aligned for a dire year for investment markets, and it turned out to be an excellent year for markets. So a degree of caution is always warranted when investors and investment commentators are largely in agreement.

Please see the Artificial Intelligence-generated article below:

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For 2025, investment market outlooks from major financial institutions reflect cautious optimism with regional and sector-specific nuances:

1. Equities: Global equities are expected to deliver mid-to-high single-digit returns, driven by corporate earnings growth and technological innovation. Emerging markets may offer slightly higher returns than developed markets, while U.S. equities could see moderated gains due to high starting valuations.
2. Fixed Income: Bonds are anticipated to provide competitive returns, with investment-grade credit yielding 3-5%, supported by stabilized interest rates and reduced inflationary pressures. High-yield and emerging market debt may also be attractive, reflecting better risk-adjusted opportunities.
3. Alternative Investments: Sectors like private equity, infrastructure, and real estate are poised for strong performance, with potential returns in the 8-12% range. These areas benefit from asset repricing, technological advancements, and their role in portfolio diversification.
4. Regional and Thematic Insights:
   • U.S. markets are expected to lead developed economies, supported by economic expansion and corporate resilience. However, election-related policy shifts could influence performance.
   • Europe is predicted to recover gradually, while China’s growth remains uncertain but holds potential upside.
   • Themes such as clean energy, AI, and infrastructure investment are seen as major growth drivers across regions.
5. General Trends: Declining interest rates and policy easing may provide tailwinds for risk assets. Diversification and a focus on resilient sectors are emphasized due to ongoing geopolitical and economic uncertainties.

This balanced outlook suggests solid opportunities across asset classes, with varied risks and rewards depending on regional and sectoral positioning.

Ian Halstead, Director of L&P Investment Services