2025年全球投資展望

GlobalInvestmentOutlook2025

DearClients,PartnersandInvestors,

Aswestepinto2025,theinvestmentlandscaperemainsbothcomplexandfullofopportunity.Navigatingthisenvironmentrequiresasteadyhand,

rigorousanalysisandacommitmenttolong-termvaluecreation.Ourannualinvestmentoutlookfortheyearaheadreflectstheseprinciples,providinga

deepdiveintothekeyforcesshapingtheglobaleconomyandcapitalmarkets.

Thisyear,wefaceadynamicmixoffactors—fromevolvingmonetarypoliciesandshiftinggeopoliticaltensionstostructuraltransformationsintechnology,energyandsustainability.Whiletheseelementsbringbothchallengesand

potentialdislocations,theyalsoopenavenuesforgrowthacrosstraditionalandalternativeassetclasses.

Ourinvestmentteamshavethoroughlyassessedthemacroeconomiclandscape,equityandbondmarkets,realassets,andtheevolvingdomainsofprivate

creditandequity.Asalways,ourfocusremainsonpreservingyourcapitalandcapturingthebestopportunitiesavailable.

Wehopethisreportservesasavaluableguidetonavigatingtheroadaheadandreinforcesourcommitmenttomanagingyourinvestmentswithdiligence,foresightanddiscipline.

Thankyouforyourcontinuedtrustinus.Warmregards,

Ab

AngeloManioudakis

GLOBALCHIEFINVESTMENTOFFICER

2025GLOBALINVESTMENTOUTLOOK|2

Contents

4Authors

GlobalEconomy

5U.S.Economy

6EuropeanandAsianEconomies

Equities

7U.S.Equities

8

Ex-U.S.DevelopedMarketEquities

9

EmergingMarketEquities

FixedIncome

10U.S.MoneyMarkets

11

Ex-U.S.MoneyMarkets

12

TreasuryInflation-ProtectedSecurities(TIPS)

13U.S.InvestmentGradeBonds

14HighYieldBonds

15SecuritizedBonds

16MunicipalBonds

Alternatives

17RealAssets

18

HedgeFunds

19

PrivateCredit

20

PrivateEquity

Multi-Asset

21KeyTacticalAssetAllocationViews

22AboutNorthernTrustAssetManagement

2025GLOBALINVESTMENTOUTLOOK|3

Authors

INVESTMENTTEAMLEADERSHIP

Angelo

Manioudakis

GLOBALCHIEF

INVESTMENTOFFICER

Michael

Hunstad,Ph.D.

DEPUTYCIOANDCIOOFGLOBALEQUITIES

ChristianRoth,CFA

CIOOF

GLOBALFIXEDINCOME

Anwiti

Bahuguna,Ph.D.

CIOOFGLOBAL

ASSETALLOCATION

Bob

Morgan

MANAGINGDIRECTOR,

50SOUTHCAPITAL

CONTRIBUTORS

DmitriArtemiev

HEADOFSECURITIZED

PORTFOLIOMANAGEMENT

DanielBallantine,CFA

PORTFOLIOMANAGER,

GLOBALASSETALLOCATION

GuidoBaltussen,Ph.D.

HEADOFQUANTITATIVE

STRATEGIES–INTERNATIONAL

AntulioBomfim,Ph.D.

HEADOFGLOBALMACRO,GLOBALFIXEDINCOME

RyanJamesBoyle

CHIEFU.S.ECONOMIST

JohnCeffalio

CO-HEADOFMUNICIPALCREDITANDSTRATEGY

ColinCheesman,CFA

PORTFOLIOMANAGER,

GLOBALASSETALLOCATION

JordanDekhayser,CFA

HEADOFEQUITY

CLIENTPORTFOLIOMANAGEMENT

LauraDiPoce,CFA

PORTFOLIOSTRATEGIST

BradleyM.Dorchinecz

MANAGINGDIRECTOROF

THEPRIVATEEQUITYGROUP,50SOUTHCAPITAL

DanFarrell

HEADOFINTERNATIONALPORTFOLIOMANAGEMENT,GLOBALFIXEDINCOME

AlexGarvin

VICEPRESIDENT,

PRIVATECREDIT,50SOUTHCAPITAL

JimHardman

HEADOFGLOBALREALASSETS,MULTI-MANAGERSOLUTIONS

DanielLaRocco

HEADOFU.S.LIQUIDITY,GLOBALFIXEDINCOME

ChaitanyaMandavakuriti,CFA

CO-HEADOFINVESTMENTGRADECREDIT

CarlTannenbaum

CHIEFECONOMIST

TristanThomas,CFA

MANAGINGDIRECTOROFPORTFOLIOSTRATEGY,

50SOUTHCAPITAL

MichaelTowle

DIRECTOROFEQUITYRESEARCH

RonitWalny,CFA

HEADOFFIXEDINCOME

CLIENTPORTFOLIOMANAGEMENT

EricWilliams

HEADOFCAPITALSTRUCTURE,GLOBALFIXEDINCOME

2025GLOBALINVESTMENTOUTLOOK|4

U.S.ECONOMY

Softlandingwithkeyuncertainties

TheU.S.economyhasmadesignificantprogresstowardasoftlanding.U.S.

realgrowthhasslowedtoastill-robustrateof2.7%onayear-over-yearbasis.Inflationhaseasedto2.7%,1and

excludinghousingitisevenlowerat

2.1%.WhileinflationstillremainsabovetheFederalReserve’s2%goal,ithas

easedenoughtoallowtheFedtostartcuttingitspolicyrate.

For2025,wearefocusedonthree

potentialscenariosfortheU.S.economy.OurbasecasescenarioremainsaSoftLanding,whereineconomicgrowth

settlesslightlybelowthatof2024,

inflationeasesfurthertoward2%andtheFedproceedswithagradualpaceofratecuts.Ouremphasisonthis

scenarioreflectsourviewthatconsumerspending—whichrepresentsaround

70%oftheeconomy—willslowfromstronggainsin2024butremainhealthyin2025,asgrowthinrealdisposable

incomewilllikelybesupportedby

favorablelabormarketconditionsandfallinginflation.Regardinginflation,weseescopeforincreasesinservicespricestosoftenaswagegainsease

andhousingpricesmoderate.

Weconsideredtwoalternativescenariosthat,inourview,reflectkeyuncertaintiesaroundtheoutlookfortheU.S.economyintheyearahead,particularlyregarding

theeconomiceffectsofthelikelypolicyinitiativesoftheincomingadministration.WecallthesetwoalternativescenariosReflationandSupplyRestraint.Inall

ofourthreescenarios,weassumethatthenewadministrationimplements

acombinationofrestrictiveimmigrationpolicies,highertariffs,incometaxcutsandapushtowardderegulation.IntheSoftLandingscenario,weassumedthatthispolicymixhasnodiscernibleeffectoninflation.

However,inboththeReflationand

SupplyRestraintscenarios,weassumethatthenewpoliciestemporarilybringthedisinflationaryprocesstoahalt

duringthefirsthalfof2025,leadingtheFederalReservetopauseitsrate-cuttingcycleformostoftheyear.

Wherethetwoalternativescenariosdifferismainlyontheneteffectofthenewpoliciesoneconomicactivity.IntheReflationscenario,weassumea

netstimulativeeffect,withgrowth

remainingabovetrendformost

of2025.Incontrast,intheSupply

Restraintscenario,theeffectof

restrictiveimmigrationpoliciesandhighertariffsleadstosupply-side

disruptionsthatcouldculminateinarecessionthatstartsinlate2025andaggressiveFedratecuts.

1Source:U.S.BureauofLaborStatistics.InflationismeasuredbytheSeptember2024

PersonalConsumptionExpendituresPriceIndex.Coreinflationexcludesmorevolatilityfoodandenergyprices.

EXHIBIT1

ContinuedGrowthExpectedin2025

ChangesinConsensusU.S.RealGDPYear-over-YearGrowthForecastsfor

2024and2025(%)

2024growthforecasts2025growthforecasts

3.0

2.5

2.0

1.5

1.0

0.5

0.0

Feb2022

Feb2023

Feb2024

Oct2022

Oct2023

Oct2024

Jun2022

Jun2023

Jun2024

Sources:NorthernTrustAssetManagement,Macrobond,Bloomberg.Grossdomestic

product(GDP)growthistheaverageleveloftheyear-over-yearchangeduringtheyear.DatarepresentsdailychangesinestimatesfromFebruary10,2022toNovember8,2024.Forecastmaybesubjecttochange.

Consensusestimatesforecast2025growthtosettleslightlybelowthisyear’ssurprisinglyrobustrate.

2025GLOBALINVESTMENTOUTLOOK|5

EUROPEANANDASIANECONOMIES

Europestraddlesgrowthand

contraction,Chinamaystruggle

Eurozoneeconomicgrowthhasbeenmixedoverthepastyear,stimulated

intermittentlybyone-offfactorslike

theParisOlympicsandvolatileexports.Themanufacturingsectorhascontinuedtocontract,mostnotablyinGermany.

Economicactivityhasstraddledtheborderbetweenexpansionand

contraction.However,business

spendingremainsrobustandpositiverealwagegrowthhassupported

consumerspending.

Wemayseesomemoderationofthe

laborforce,butitappearsresilientfornow,withunemploymentatalowof

6.3%.2Inflationhasreturnedtothe

EuropeanCentralBank'stargetof2.0%,3thoughservicesandcoreinflationsit

athigherlevels.Inadditiontofiscal

consolidationbeingapotentialdragongrowth,externalshockssuchastherisksofanincreaseintradebarriers

andoffurthergeopoliticaltensionsarelikelytoalsodragonthelargeexportsectorandgrowth,ingeneral.With

regardtotheU.K.,wehaveamorebalancedoutlook.Thegovernment’sbudgetmaybeslightlyreflationary,soweexpecttheBankofEngland

tomaintainagradualandcautiousapproachtoratecuts.

AmongAsiannations,theoutlook

forChinaremainsacentralconcern.

Economicgrowthisfallingshortof

thegovernment’s5%target.Domestic

consumptionremainsmutedasthe

consumerfacesafallingproperty

marketandhighyouthunemployment(seeexhibit).Manufacturingand

exportshavesoftenedandfacethe

increasingriskoftariffs.Aslowing

economyisdeepeningadeflationaryloop,withconsumerpriceinflationonlyslightlyabovezeroandproducerpricesdeepintodeflation.Investorscheeredthecoordinatedmonetaryandfiscal

policysupportinChina,butthegovernmenthasyettoannounce

fulldetails.AmidafavorablegrowthoutlookinAsia,China’sprospectsaretheleastfavorable.

Japancontinuedonitsownpathin

2024—movingtoraiseratesandexitadecade-plusofnegative-ratepolicyduringatimewhenanumberofmajordevelopedmarketcentralbankswerecuttingrates.Economicgrowthin

2024wasunspectacularwithsluggishconsumptionaheadwindearlyon,

despitesomesubsequentimprovement.However,wagegainsarespreading

acrosstheeconomywitharobust

2024outcomeforwagesandasimilaroutlookfor2025.Thisbodeswellfor

consumptiondowntheroad.Still,

longertermgrowthheadwinds

remainintermsofdemographics

andproductivity.WethinktheBank

ofJapanwilllooktocontinueraising

ratesbutwillhavetomonitoranumberofpotentialcrosswinds.

2Source:FactSet,unemploymentisforSeptember2024.3Source:FactSet,mostrecentinflationistheConsumerPriceIndexasofOctober2024.

EXHIBIT2

China’sDomesticConsumptionFacesHeadwindofFallingRealEstate

ChinaConsumerConfidenceandHomePrices

Consumerconfidenceindex(leftaxis)

Homepricechangesyear-over-year(%,rightaxis)

70-15

20112012201320142015201620172018201920202021202220232024

Sources:NorthernTrustAssetManagement,Bloomberg,NBS.MonthlydatafromJanuary31,2011toSeptember30,2024.Left:Theindexmeasuresconsumerconfidenceonascaleof

0to200,where200indicateextremeoptimism,0extremepessimismand100neutrality.

Right:Second-handresidentialbuildingsprice,year-over-year.

Stemmingthefallinhomepricesisakeyvariableinrestoringconsumerconfidence.

2025GLOBALINVESTMENTOUTLOOK|6

U.S.EQUITIES

Earningsmaysupportlargecapvaluations,smallcapspromising

WithU.S.largecapstocksupmore

than21%thisyearthroughOctober,followinga26%increasein2023,

thelogicalquestionishowmuchmoreroomtheyhavetorun.4Price-to-

earningsratiosarehoveringnear27,wellabovethelongerrunaverageof21.5ItcertainlyappearsU.S.largecapequityvalueshavebecomeinflated,riskingadownsidecorrection.

However,weexpectcontinuedU.S.

economicgrowthinthenear-and

intermediate-termtotranslateinto

healthyrevenuegrowth.Analysts

expectsalestogrowata6%clipoverthenexttwoyears.Profitmargins(seeexhibit)havebeenexpandingata

relativelysteadypace.Weexpectthistrendtonotonlycontinuebutpossiblyaccelerateduetoproductivitygains

fromtheadoptionofartificial

intelligence,declininginterestratesandanextensionof(andpossibly

additional)taxcutsunderPresident-electDonaldTrump’sadministration.

Strongsalesgrowthplusincreasing

marginsleadstopositiveexpectationsforearnings.Analystestimatesshow

14%earningsgrowthforthenextyear6and13%forthefollowingyear.At

today’sequityprices,theseearningsgainssuggestaforwardprice-to-

expected-earningsratiocloserto

18,whichismorereasonableand

sustainable.Whileweanticipatesomemodestmultiplecontractioninthe

comingyears,weareconstructiveon

U.S.largecapequitiesandfeelearningsgrowthwilloutpaceanymultipledecline.

Ofcourse,U.S.largecapequities

areincreasinglydominatedbya

smallhandfuloftechnologyand

communicationservicescompanies.

Whilehighermarketconcentrationis

synonymouswithlowerdiversificationandhigherrisk,thecurrentmarket

looksnothinglikethatofthedot-combubbleofthelate1990s.Today,the

biggesttechnologycompanieshave

amongthehighestearningsgrowth,

profitmargins,capitalexpenditures

andfreecashflowgenerationinthe

S&P500Index.Whiletheyalsohave

higherprice-to-earningsratios,wefeelthesemultiplesarejustifiedbystrongfundamentals.Still,theseelevatedpricesputalimitonfuturegainsandwedon’texpectarepeatofthelasttwoyears.

U.S.smallcapreturnshavebeen

somewhatmoremodestat10%this

yearthroughOctoberaftera16%gainin2023.7Whilestrongeconomicgrowthshouldalsoelevatesmallcaps,wethinkdeclininginterestrateswillfurtheraidperformanceasabouthalfofsmallcapdebtisfloatinginterestrate.Lower

ratesmayexpandmarginsandPresident-electDonaldTrump’s

re-shoringeffortswilllikelyboost

earnings.These,combinedwith

reasonablevaluations,leadsustobeconstructiveonU.S.smallcapsaswell.

EXHIBIT3

RisingProfitMargins

AverageProfitMarginofCompaniesintheS&P500Index(%)

Profitmargin(%)--Trendline

16

14

12

10

8

6

4

2

0

199119951999200320072011201520192023

Sources:NorthernTrust,Bloomberg.DatafromJanuary31,1991toOctober31,2024.Pastperformanceisnotindicativeoraguaranteeoffutureresults.Indexperformancereturnsdonotreflectanymanagementfees,transactioncostsorexpenses.Itisnotpossibletoinvestdirectlyinanyindex.Indexesarethepropertyoftheirrespectiveowners,allrightsreserved.

Profitmarginshavetrendedupwardsfordecadeswithpotentialtoacceleratefromartificial-intelligence-relatedproductivitygainsandothercatalysts.

4Source:Bloomberg;theindexistheS&P500Index,whichtrackstheperformanceofU.S.largecapcompanies.5Source:Bloomberg,asofOctober31,2024,longrunaverageisfor20years.

6Source:FactSet.7Source:FTSE-Russell,basedontheRussell2000Index,whichtrackstheper-formanceofU.S.smallcapitalizationstocks.Pastperformanceisnotindicativeoraguaranteeoffutureresults.Indexperformancereturnsdonotreflectanymanagementfees,transactioncostsorexpenses.Itisnotpossibletoinvestdirectlyinanyindex.Indexesarethepropertyoftheirrespectiveowners,allrightsreserved.

2025GLOBALINVESTMENTOUTLOOK|7

EX-U.S.DEVELOPEDMARKETEQUITIES

Developedex-U.S.stocksmaycontinuetolagtheU.S.

Largecapstocksfordeveloped

countriesoutsidetheU.S.(developedex-U.S.)havepostedanearly8%

gainyear-to-datethroughOctober,significantlytrailingthe21%returnofU.S.largecapequities.8Whilethedifferenceisstark,it’sacontinuationofatrendongoingsincetheGlobalFinancialCrisisin2009.

Overthe15-yearperiodending

October2024,developedex-U.S.stockshavereturnedanaverageofabout

6.2%annuallywhileU.S.largecapshavegainedabout14%annually.9Before

weprojectthesedifferencesintothefuture,it’simportanttoexaminewhathasdriventhishistoricaldivergence.

First,thesectorcompositionofthesemarketshashadamajorimpact.

Technologyandcommunication

servicescompanies,keydriversof

globalequityperformance,hold

nearlya41%weightinU.S.largecap

benchmarksbutlessthan13%in

developedex-U.S.benchmarks.10

Incontrast,developedex-U.S.hasa

significantlyhigherweighttofinancialsandindustrials,makingthesector

profileskewtothevaluestylewhile

U.S.benchmarksskewmoretogrowth.Lowinterestratesinthepost-Global

FinancialCrisiseragenerallyfavoredgrowthstocksand,hence,U.S.

benchmarks.Sectorweightsaloneexplainabouthalfthedifferencesinperformancesince2009.

Second,economicgrowthhasbeen

lowerindevelopedex-U.S.countries

thanintheU.S.Forexample,theexhibitdetailsthetrendingrowthfortheU.S.andtheeuroarea.In2009thesetwo

regionswerenearlyatparitybutsincethentheU.S.hasgrownatdoubletherateoftheeuroarea,largelymirroringequityreturns.Further,therateatwhicheconomicgrowthhastranslatedto

revenuegrowthhasbeensignificantlydifferentbetweenthesetworegions.

In2025,decliningglobalinterestratesmayfavorsectorsmoreprevalentin

developedex-U.S.benchmarksbutweexpecteconomicgrowthdifferencestopersist.Whiledevelopedex-U.S.price-to-earningsmultipleslookattractive

fromahistoricalperspective,wedon’texpectnear-termexpansiongiven

theslowergrowthoutlook.Wedoanticipatesomemarginexpansionfromartificialintelligenceandlowerinterestrates,butnotenoughon

balancetooffsetlowrevenue

expectations.Sowecontinueto

expectthatdevelopedex-U.S.largecapstockswillcontinuetotrailU.S.largecaps.Thatsaid,developed

ex-U.S.canplayanimportantportfoliodiversificationrole,giventheirvery

differentsectorprofileandinterestratesensitivitythatcanhelpmanagerisksfromahighlyconcentratedU.S.equitymarket.

EXHIBIT4

U.S.EconomyHasOutpacedEurope

GrossDomesticProduct($trillions)

U.S.Euroarea

30

26

22

18

14

10

200920102011201220132014201520162017201820192020202120222023

Source:Bloomberg.Dataannualfrom2009to2023.Historicaltrendsarenotpredictiveoffutureresults.

WhilethesizeoftheU.S.economyaftertheGlobalFinancialCrisiswasaboutthesameasEurope’seconomy,amoredynamicU.S.

hashelpeditsignificantlyoutpaceEuropesince.Weexpectthisdivergencetocontinue.

8Source:MSCI,basedontheMSCIWorldex-USAIndex,whichtrackstheperformanceoflarge-andmid-capcompaniesacross22of23developed-marketscountries(excludingtheU.S.).U.S.largecapperformanceisbasedontheS&P500Index,whichtrackstheperformanceofU.S.

largecapstocks.Pastperformanceisnotindicativeoraguaranteeoffutureresults.Index

performancereturnsdonotreflectanymanagementfees,transactioncostsorexpenses.Itisnotpossibletoinvestdirectlyinanyindex.Indexesarethepropertyoftheirrespectiveowners,allrightsreserved.9Sources:MSCI,Bloomberg,performancebasedontheMSCIWorldex-USAIndexandtheS&P500Index,whichtrackstheperformanceofU.S.largecapstocks.10Source:FactSet,asofOctober31,2024,basedonweightingsintheMSCIWorldex-USAIndexandtheS&P500Index.

2025GLOBALINVESTMENTOUTLOOK|8

EMERGINGMARKETEQUITIES

Ridingthetailwindsofvaluationandgrowth

Emergingmarketstocksoutperformeddevelopedmarketstocksbyanaverageof9.9%peryearduringthefirstdecadeofthiscentury.11However,emerging

marketshaveunderperformedby

anaverageof6.9%peryearsince,

deliveringadisappointing3.7%

annualizedaveragereturn.12Thisis

despiteemergingmarketcompanieshavingsimilarsalesgrowth,profit

margins,valuationsanddividendyieldstodevelopedmarketcompanies.13

Sowheredidemergingmarketsslip?Theprimarydetractortoemerging

marketreturnshasnotbeenfunda-

mentalweakness,butrathershare

issuance,notablyoutofChina,thathasreducedreturnspersharetoinvestorsby6.1%peryearoverthelast10years(seeexhibitformoreinformation).

Whileweexpectshareissuanceto

continueweighingonperformance,thereareseveralpotentialreturn

driversin2025.First,fromavaluationperspective,emergingmarket

companiestradeatasizablediscounttodevelopedmarketsandtheyalsocarryafavorableearningsoutlook.

Further,theChinesegovernment

recentlyintroducedstimulusintendedtoboostdemandandstabilizetherealestatemarket.Investorsinitiallyreactedfavorablytothesemeasures,althoughtheyshouldconsidertheimpactof

potentialU.S.tariffsonChinesegoodsbasedoncampaignrhetoricfromU.S.President-electDonaldTrump.Weareskepticalthatthestimuluswillcreate

asustainedcyclicalturnaroundorresolveChina’sstructuralissues,butwethinkitisastepintherightdirection.

AlthoughemergingmarketsareaboutmuchmorethanChina,thecountry

accountsfor27%oftheMSCIEmergingMarketsIndex’sweighting.TheAsia-

PacificregionincludingChinaaccountsfor80%oftheindex,soitishardto

seeemergingmarketsthrivingwithoutatailwindfromChina.

DespitetheconcentrationtoAsia-

Pacific,emergingmarketscontinue

toofferexposurestoadiversesetof

themesbothglobalandlocalinnature.Withelevatedmarketconcentrationindevelopedmarkets,drivenlargelyby

theU.S.,diversificationisespecially

important.Emergingmarketequities

cancontinuetoplayanimportantroleininvestorportfolios,especiallygiventhepotentialofferedbyfavorable

valuations,earningsgrowthand

diversificationbenefitstodeveloped

marketequities.Withavaluation

cushion,andotheremergingmarketsoutsideofChinawithbrighteroutlooks,westayconstructiveonemerging

marketsin2025.

11Source:Bloomberg.ReturnsarebasedontheMSCIEmergingMarketsIndexfromDecember31,1999toDecember31,2009.Theindexmeasurestheperformanceoflarge-andmid-capstocksacross24emergingmarketscountries.Emergingmarketsaregenerallyinfast-growingcountrieswithdevelopingeconomies.

EXHIBIT5

TheDragofShareIssuance

TotalReturnBreakdown(%)(October2014–October2024)

■Revenue■Shares■Valuations■Dividend●Totalreturn

20

15

10

5

0

-5

-10

-15

10.6

15.2

10.1

5.6

6.4

10.6

2.6

GlobalEmergingChinaTaiwanIndiaSouthKoreaBrazil

marketsmarkets

Sources:NorthernTrust,FactSet,MSCI,Bloomberg.Totalreturnsincludinggrossdividendsinlocalcurrencies,fromOctober31,2014toOctober31,2024.Indexperformancereturnsdonotreflectanymanagementfees,transactioncostsorexpenses.Itisnotpossibletoinvestdirectlyinanyindex.Pastperformanceisnotindicativeoffutureresults.

INDEXDEFINITIONS

Globalmarket=MSCIACWIIndex,whichtrackstheperformanceoflarge-andmid-cap

companiesincountrieswithdevelopedanddevelopingeconomies.Emergingmarkets=MSCIEmergingMarketsIndex,whichtrackstheperformanceoflarge-andmid-capstocksacross24countrieswithdevelopingeconomies.China,Taiwan,India,KoreaandBrazilarerespectively

representedbytheMSCIChinaIndex,MSCITaiwanIndex,MSCIIndiaIndex,MSCIKoreaIndexandMSCIBrazilIndex,whichalltrackperformanceoflarge-andmid-capstocksinthosecountries.

Highshareissuanceinemergingmarkets,versustheglobal

market,causedemergingmarketstounderperformoverthepast10years.However,webelieveemergingmarketsarepositionedforbetterperformancegoingforward.

12Source:Bloomberg.ReturnsarebasedontheMSCIEmergingMarketsIndexfromDecember31,2009toOctober31,2024.13Valuationistheprocessofdeterminingthevalueofanasset

basedontheanalysisofvariablesrelatedtoinvestmentreturnsorcomparisonswithsimilar

assets.Dividendyieldisthedividendpersharedividedbytheshareprice,inpercentageterms.

2025GLOBALINVESTMENTOUTLOOK|9

U.S.MONEYMARKETS

Moneyfundassetsupwhileratesgodown

WhiletheFederalReservewaswidelyexpectedtolowerinterestratesin

2024,expectationsforthetiming

andmagnitudeofratecutsvaried

meaningfullyoverthecourseofthe

year.InJanuary,federalfundsfutures14marketsimpliedasmanyassixtosevenquarter-pointreductionsbytheend

of2024—anexpectationweand

manyothersviewedasanoverreaction.Marketsdialedbackratecutexpectationsthroughouttheremainderofthefirst

andsecondquarter.TheFedultimatelyheldpolicyratessteadyformorethanayearbeforedeliveringahalf-point

“recalibration”ratecutinSeptemberandaquarter-pointcutinNovember.

For2025,thereissignificantuncertaintyovertheeconomicoutlookand

monetarypolicy.Afairlywiderange

ofoutcomeswithrespecttothe

federalfundstargetrangearepossible.Accordingly,wefavoraneutralpositionforourportfolios.Importantlyfor

moneymarketinvestors,weandthe

marketsseelittlechanceratesreturntothezerolowerboundanytimesoon—awelcomechangefrommuchofthepast15yearsofverylowyieldsoncash.

Whilethefederalfundstargetrangeisthebiggestdriverofmoneymarketfundyields,moneymarketsalso

exhibitedsignsofnormalizationin

2024,withmoreratevolatilitywithin

thefederalfundstargetrange.Creditspreadsweregenerallylittlechanged,toslightlytighter.WhileparticipationintheFed’sreverserepurchase

agreementoperations(RRP)15peakedat$2.3trillionin2023,ithastrendedsubstantiallylowertoaslowas$150

billion.Thisisaconsequenceof

balancesheetreductionbytheFed.Whilemoneymarketratevolatilityisnormal,ratesnearorabovethetopofthetargetrangemaybeasignofreservescarcity.TheFed’sbalancesheetreductionmayneedtoend,adynamicwe’llbemonitoringclosely.

Whileintuitionmaysuggestthatas

yieldsonmoneymarketfundsmove

loweralongwithpolicyratesthey

wouldbelessattractiveanddrive

outflows,we’veseentheopposite

in2024,consistentwithhistorical

experience.Moneymarketfund

industryassetshaveincreasedby

morethan$500billionthisyear(see

exhibit),settingall-time-highrecords.Assetshavebeengoingupevenas

ratesaregoingdown,asmoneymarketfundsremainanattractivealternativetoothercashmanagementoptions

likedepositsorTreasurybills.

14Federalfundsfuturesarecontractsusedtohedgeshort-terminterestraterisk.Theyreflectthemarket’sinsightonthefuturecourseoftheFederalReserve’spolicyrate.15Aprogram

wheremoneymarketinvestorscaninvestcash(versusTreasurycollateral)overnightandearnaninterestratesetbytheFed.

EXHIBIT6

U.S.MoneyMarketAssetsRiseEvenasRatesFall

U.S.MoneyMarketAssets($trillions)

6.66.56.46.36.26.16.05.95.8

JanFebMarAprMayJunJulAugSepOct

2024202420242024202420242024202420242024

Source:Bloomberg,fromJanuary3,2024t