According to recent forecasts from the International Monetary Fund (IMF), growth in the United States is expected to decelerate, though remain solidly positive, over the next 18 months. However, a slowdown in growth isn’t the same as stagnation and doesn’t necessarily indicate that the economy is in bad shape. In fact, a moderation in growth reverting to its long-term trend rate could be evidence of the excess fiscal stimulus of the past few years waning and tighter monetary policy working — allowing for the economy to cool, inflation to moderate, and a soft landing to be achieved.
Not only are U.S. growth expectations positive through 2025, but they easily outpace other major developed economies. This year’s forecasts are particularly strong, effectively tripling that of Japan while outpacing the U.K. and euro area countries to an even greater degree. Those expectations are more tempered in 2025, though notably, the United States is still expected to grow faster than the rest of the developed world.
Why does this matter for investors? The economy isn’t synonymous with the stock market, but the two are nevertheless highly correlated. Stronger growth often translates into higher earnings for businesses. As such, a more robust economy in the United States can accompany a more favorable backdrop for business conditions in the coming years relative to the rest of the world. That ties directly back to stronger earnings expectations for the U.S. stock market compared to other major equity markets. Opportunities clearly still exist internationally, but equity investors should consider leaning into the United States against that backdrop.
Data sources for peer group comparisons, returns, and standard statistical data are provided by the sources referenced and are based on data obtained from recognized statistical services or other sources believed to be reliable. However, some or all of the information has not been verified prior to the analysis, and we do not make any representations as to its accuracy or completeness. Any analysis nonfactual in nature constitutes only current opinions, which are subject to change. Benchmarks or indices are included for information purposes only to reflect the current market environment; no index is a directly tradable investment. There may be instances when consultant opinions regarding any fundamental or quantitative analysis may not agree.
Plante Moran Financial Advisors (PMFA) publishes this update to convey general information about market conditions and not for the purpose of providing investment advice. Investment in any of the companies or sectors mentioned herein may not be appropriate for you. You should consult a representative from PMFA for investment advice regarding your own situation.
