KKR 2025 Economic Outlook | Divergent Recovery Has More Room to Run
- Editor
- Dec 28, 2024
- 2 min read
What's New: KKR's Henry McVey delivers a nuanced "Glass Half Full" outlook for 2025, predicting continued but uneven global growth amid unprecedented wealth disparities, with U.S. GDP forecast at 2.5% versus China at 4.4% and Europe at 0.8%.
Why It Matters: This forecast comes at a critical juncture where traditional economic patterns are being disrupted by a "Regime Change" characterized by bigger government deficits, intensified geopolitical competition, and a complex energy transition that's reshaping global markets.
Big Picture Drivers:
A stark global wealth divide is emerging, with just 1.5% of the world's population controlling 48% of global wealth, while many struggle with inflation
U.S. productivity surge and easy financial conditions are sustaining growth, though returns may be lower than in 2024
Asynchronous global recovery continues with domestic-focused economies like U.S. and India outperforming export-dependent nations
By The Numbers:
U.S. household net worth hit record $160+ trillion by end of 2023, but 69% is controlled by those aged 55+
Only 21% of U.S. households owned stocks directly in 2022, limiting participation in market gains
Lowest-income Americans saw a 7% decline in savings since 2019, while wealthy clients' balances rose 37%
Key Trends to Watch:
Central bank divergence: ECB cutting before Fed, Bank of Japan raising rates, while China battles deflation
Currency market volatility emerging as a key risk factor, potentially exceeding bond market concerns
Energy security becoming increasingly intertwined with national security as AI drives demand
The Bottom Line for Investors: While market gains are expected to continue in 2025, investors should prepare for lower returns and higher volatility. Success will likely come from understanding the "Regime Change" thesis and positioning for a world where earnings growth matters more than multiple expansion, particularly in domestic-oriented economies and sectors benefiting from technological advancement.
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