The EFG Market Outlook 2025 conference brought together financial professionals to discuss key trends and investment opportunities for the year ahead. Moz Afzal, Global Chief Investment Officer of EFG International, shared EFG’s top-ten convictions for 2025 and reviewed the accuracy of the firm’s 2024 forecasts, providing insights into market dynamics and investment strategies.
Market Trends and Economic Landscape
One of the key takeaways from the conference was the unexpected persistence of high interest rates. Despite traditional economic theories predicting a decline in gold prices under such conditions, gold remains a strong investment choice, puzzling many analysts. Some speculate that geopolitical concerns and asset diversification by major economies such as China and Russia might be driving this trend. As Afzal pointed out, gold’s performance may resemble that of a “meme stock,” influenced by sentiment and market narratives rather than purely fundamental factors.
“AI itself is just a regression – the real value lies in creativity and how we apply it.”
Regional Market Performance
Looking at global markets, Hong Kong demonstrated an impressive 17% rise after experiencing a significant downturn last year. Chinese markets, while still undergoing internal structural reforms, have also seen a resurgence. European equities have performed exceptionally well, surpassing expectations, and proving to be a strong asset class in 2025. Bonds, on the other hand, have shown mixed results, with European government bonds delivering modest gains.
In the U.S., the tech-heavy NASDAQ has experienced fluctuations, with six of the top seven companies driving market performance. This concentration raises concerns about sustainability and potential volatility. Afzal emphasized the importance of diversification beyond the U.S., with European equities presenting attractive valuation opportunities.
The Role of AI, Thematic Investments, and Google Search Trends
Technology continues to be a dominant force in the market, with artificial intelligence (AI) remaining at the forefront of investment themes. Google search trends indicate a growing focus on AI and weight-loss drugs, specifically GLP-1 receptor agonists. These pharmaceutical advancements are poised to disrupt consumer behavior, leading to declining sales in food, beverage, and alcohol industries. Companies that fail to adapt to changing consumption patterns could face long-term profitability challenges.
Afzal also highlighted that macroeconomic concerns have shifted. Unlike in previous years where inflation or recession fears dominated, investors today seek a more stable and predictable economic environment. Despite political uncertainties, such as the upcoming U.S. elections and geopolitical tensions, markets appear to be showing resilience.
“Creativity is the epicenter of Europe, and that’s what will drive future value.”
Valuation Models and Future Outlook
A crucial part of EFG’s investment approach is the use of proprietary valuation models that mitigate bias. By aggregating multiple valuation metrics, EFG aims to provide a clearer picture of market conditions. Current assessments indicate that while some sectors appear overvalued, opportunities exist in consumer discretionary and financial sectors, which have begun to show positive earnings revisions.
Afzal also noted that while U.S. equities remain a stronghold, diversification into European and Japanese markets could yield better risk-adjusted returns. Europe, in particular, is showing signs of stronger earnings growth and attractive valuations, making it a compelling choice for investors looking beyond U.S. equities.
Second-Half Projections and Global Economic Developments
Afzal projected that economic growth will remain resilient in 2025, though divided into two distinct halves. The first half of the year is expected to face uncertainties due to fiscal retrenchment, particularly in Europe. However, a shift in Germany’s fiscal policies and potential interest rate cuts could provide a boost to European markets later in the year. He suggested that if interest rates in Europe drop to around 1.75%, economic growth in 2026 could see a significant rebound.
The geopolitical landscape remains a key factor influencing global markets. Afzal pointed out that Trump’s potential trade tariffs could introduce significant market volatility. Based on analysis from the London School of Economics, tariffs targeting China and Europe could impact corporate profitability and global trade flows. He also emphasized the growing importance of BRICS nations, which now represent nearly half of the world’s population and GDP. The possibility of BRICS forming their own trade alliances could challenge U.S. economic dominance and create new market dynamics.
Additionally, Afzal highlighted the ongoing evolution of interest rates. While the U.S. has recently begun shifting towards a more dovish stance, European and Swiss central banks may implement rate cuts ranging from 50 to 75 basis points throughout the year. He projected that these monetary policy changes would help stabilize global economies and encourage investment, making the latter half of 2025 more favorable for market growth.
“If the top companies continue at their current pace, their market cap will soon match global GDP.”
Entrepreneurial Governance and Market Implications
A notable discussion revolved around the idea that private entrepreneurs might be more efficient at managing government budgets than traditional policymakers. Afzal noted that within the Trump administration, some figures have approached the U.S. deficit issue as a cost-cutting exercise similar to corporate restructuring. The principle is simple: if expenditures can be reduced to 2019 levels while maintaining current revenue streams, a significant budget surplus could be achieved.
This mindset, akin to how Elon Musk approaches business turnarounds, suggests that government finances can be optimized through aggressive cost reductions and efficiency measures. While such an approach might be feasible in the U.S., Afzal argued that it is less likely to be implemented in Europe due to structural differences in governance and public sector frameworks.
The Future of AI and Energy Needs
Afzal also emphasized the massive capital investments flowing into AI, with estimates reaching $350 billion for 2025. Companies like Apple have pledged significant resources, making AI one of the biggest bets in corporate history. However, he warned that while AI has immense potential, investors must carefully assess whether the current level of expenditure will yield sustainable returns.
A key challenge for AI development is energy consumption. AI searches require significantly more power than traditional computing tasks, and the demand for electricity is expected to soar. Afzal pointed out that nuclear power could emerge as a critical solution for AI infrastructure, particularly in China, which is currently leading in nuclear energy investments. The U.S., on the other hand, has yet to announce major nuclear initiatives, but Afzal speculated that the next U.S. administration might prioritize energy projects to support AI growth.
“We are in a world where investors are no longer obsessed with inflation, but rather with predictability.”
Opportunities and Strategies for 2025
The EFG Market Outlook 2025 conference provided valuable insights into global economic trends and investment strategies. The overarching message was clear: while high interest rates and market volatility present challenges, they also create opportunities. Diversification, a keen understanding of thematic trends, and a data-driven approach to valuation will be essential for navigating the investment landscape in 2025.
With sectors such as technology, healthcare, and financials showing promise, investors should remain agile and well-informed to capitalize on emerging market shifts. As Afzal aptly put it, the key to success in 2025 lies in balancing risk with strategic positioning in a rapidly evolving financial world.
