By Peter Thal Larsen
LONDON- As the world rings in 2025, try to imagine what it would have looked like in 2019 if a visitor from the future appeared with a warning about what was going to happen next.
First, the world would be struck by a deadly pandemic that shut down most developed economies. Governments would splash out to support people and businesses, adding to their already hefty debt loads. Global supply chains would strain and splinter.
Then, just as the planet was staggering back to its feet, Russian President Vladimir Putin would invade Ukraine, upending global supplies of energy and food. To control rampant inflation, the US Federal Reserve would hike official interest rates from close to zero to over 5 percent in little more than a year. A new war in the Middle East would kill thousands and threaten to disrupt global shipping. And at the end of 2024, Donald Trump would win the US presidential election following a campaign promising blanket tariffs and mass deportation.
Presented with such a prognosis in 2019, most observers would probably have expected a recession, and a dire performance by global stock markets. They would have been wrong. Western economies roared back from their brief Covid-induced slump and have so far avoided the often predicted “hard landing”. The S&P 500 Index of leading US stocks has almost doubled in the past five years, fueled by robust corporate profits and excitement about the potential of artificial intelligence. The US stock market trades at a higher multiple of cyclically adjusted earnings than at any time outside the dotcom craze of the late 1990s.
That record reflects the surprising resilience of the global economy and financial system in the face of even severe shocks. It’s also a sobering reminder of how hard it is to make predictions about the future.
This is the humbling backdrop against which Breakingviews columnists have once again embarked on their annual attempt to help readers think about what lies ahead in 2025. As in previous years, the objective is not to make forecasts which cling to the established consensus, but to identify some of the shocks and surprises that may confront business leaders, money managers and policymakers in the next 12 months. The only thing that is certain is that the range of conceivable outcomes is wider than ever. —Reuters
