Deutsche Bank's 2025 Global Financial Markets Survey: Key Predictions and Risk Assessment

Deutsche Bank's 2025 Global Financial Markets Survey: Key Predictions and Risk AssessmentDeutsche Bank's 2025 Global Financial Markets Survey, conducted from December 10th to 13th, 2024, compiled responses from 471 participants worldwide, painting a complex picture of the upcoming year. The survey revealed numerous key insights across economic growth expectations, major risk factors, asset price predictions, and technological shifts

Deutsche Bank's 2025 Global Financial Markets Survey: Key Predictions and Risk Assessment

Deutsche Bank's 2025 Global Financial Markets Survey, conducted from December 10th to 13th, 2024, compiled responses from 471 participants worldwide, painting a complex picture of the upcoming year. The survey revealed numerous key insights across economic growth expectations, major risk factors, asset price predictions, and technological shifts. The thirteen key findings are detailed below:

1. Optimistic US Growth Outlook Exceeds European Expectations: Only 2% of respondents predicted US economic growth below 1% in 2025, a figure representing the average expectation for European growth. The average projected US growth was 2.5%, significantly exceeding all respondents' predictions for Europe; none anticipated European growth reaching or surpassing 2.5%. This stark difference reflects investors' divergent expectations for the future trajectories of these two major economies.

2. Global Trade Wars Emerge as the Biggest Risk: Respondents identified global trade wars as the biggest potential risk for 2025, followed by a tech stock crash and concerns about inflation and bond yields. This ranking highlights the potential threat of geopolitical instability to global financial market stability.

3. Expectations Regarding Trump's Tariff Policies: Investors generally believe Trump is serious about tariffs, but the average score (on a scale of 1-5) was 5, suggesting they expect his actions to be less drastic than his campaign promises. Only 6.4% of respondents believe Trump will adopt more extreme tariff measures (scoring 8 or above). This reflects a degree of anticipated caution and uncertainty surrounding Trump's policies.

4. Anticipated Reform of Germany's "Debt Brake": The vast majority of respondents (90%) believe Germany's "debt brake" mechanism will be reformed; however, only 12% anticipate significant changes. This suggests potential adjustments to German fiscal policy, but the extent of reform may be relatively limited.

5. Stronger Belief in "Debt Brake" Reform Among German Respondents: Compared to global respondents, German participants expressed stronger confidence in some form of "debt brake" reform. Only 2% of German respondents believe the "debt brake" will remain unchanged. This difference may reflect a higher level of domestic consensus regarding fiscal policy reform in Germany.

6. Assessment of Tech Stock Bubble Risk: Although fewer people considered a US tech stock bubble to exist in 2024 compared to 2021, the number remains high. The bubble score for the Mag-7 (seven major tech stocks) index in 2024 did not significantly increase, even with the index growing by 72.5% in 2024. The survey shows Bitcoin carries the highest bubble risk, while European stocks were considered furthest from a bubble. This indicates some lingering investor concern regarding tech stock valuations.

7. Mag-7 Future Trajectory Prediction: For the Mag-7 index in 2025, 33% of respondents believe it will decline, with 22% predicting a drop exceeding 10%. However, 67% believe the Mag-7 index will rise, with an average expected increase of 6.8%, lower than the projected 12.9% for 2024. This reflects a divergence of opinion among investors regarding the future growth potential of tech stocks.

8. US Treasury Yield Expectations: The average projected US Treasury yield for 2025 is 4.2%, slightly below current levels. Only 4% of respondents believe the US Treasury yield will exceed 5% by the end of 2025. This suggests a relatively cautious but optimistic outlook among investors regarding future US Treasury yields.

9. German Bond Yield Expectations: German bond yields are expected to remain relatively stable in 2025. However, 50% of respondents anticipate the 10-year German Bund yield will fall below 2% by year-end. This expectation may reflect the influence of European Central Bank monetary policy and a relatively pessimistic outlook on European economic growth.

10. S&P 500 Index Expectations: The S&P 500 index is projected to rise by 5.2% in 2025. While 23% of respondents expect a decline and 23% anticipate growth exceeding 10%, the majority (35%) predict growth between 5% and 10%, with a greater concentration of gains compared to previous years. This prediction demonstrates a relatively optimistic outlook on the US stock market's future performance, but also hints at potential market volatility.

11. Bitcoin and Nvidia Price Expectations: The survey suggests the probability of Bitcoin and Nvidia prices halving is higher than doubling, particularly for Bitcoin. However, 24% and 28% of respondents, respectively, anticipate their prices doubling. This divergence reflects significantly different views among investors regarding the future trajectory of cryptocurrencies and tech stocks.

12. Current State of AI Application: While AI is increasingly integrated into office environments, there has been no significant increase in widespread AI adoption over the past five months. This suggests the actual rate of AI technology adoption may be slower than anticipated.

13. Diverging US and European Inflation Expectations: Significant differences exist between US and European inflation expectations. US inflation expectations rebounded in 2024, while European expectations dropped sharply since summer 2024, falling below 2% for the first time since Q4 2021. This difference may be related to factors such as monetary policies, economic structures, and geopolitical environments in the US and Europe.

In conclusion, Deutsche Bank's 2025 Global Financial Markets Survey reveals a future financial environment full of both opportunities and challenges. Global trade wars, tech stock volatility, and inflation risks remain key concerns. Investors are relatively optimistic about US economic growth but more cautious about Europe. Future trajectories for different asset classes vary significantly, requiring careful risk assessment and investment decisions. While AI technology offers promising prospects, its adoption rate may be slower than expected. Finally, the significant divergence in US and European inflation expectations warrants close attention from investors.