The appropriate amount of fear + 10 surprises for 2025 - VP 2025 Themes (Part 1, December Macro Snapshot)

This is part 1 of our 2025 outlook on the most top of mind topics in macro and markets. Upcoming reports will focus on G3 economies and outliers within DM and EM.

• VP Macro Regime shows growth, inflation, policy and liquidity risks are still in balance, which favors benchmark weights for equities and bonds
• However, it’s hard to ignore signs of complacency in volatility markets and structural indicators showing low margins of safety in risk asset prices, making it prudent to start adding long volatility exposures
• Given the crosswinds at present, and in tribute to Byron Wien, we present our 10 surprises for 2025

Top 10 Surprises for 2025

1. Trump’s tariff and migrant policies not as inflationary as feared
2. US growth neither collapses nor surges, supported by consumption
3. Powell does nothing after Jan 2025… no cuts, no hikes
4. US 10y yields never break 5% thanks to “Bessent put” + foreign buyers
5. US small caps continue to underperform
6. Trump and Xi make a deal
7. EURUSD breaks parity as Germany keeps “braking” its economy
8. OPEC loses more members as oil falls further
9. Gold fails to make new highs, underperforms 60-40
10. Capital Cycle: buy China tech, Luxury goods as contrarian play