Fisher Investments Canada Reviews its Outlook for Global Stocks in 2025

Global Investor Sentiment Disconnects

We believe this year will feature a rotation in leadership from US stocks—dominated by large, growth-oriented stocks—to European stocks, which feature more value-oriented stocks. Importantly, we still believe US stocks will do well, but European stocks have higher upside potential.

One reason for this is investor sentiment. Investors are relatively optimistic on US stocks. US stocks have outperformed most years going back to the Great Financial Crisis, led by many of the big, growth-oriented technology stocks that benefit from trends in areas such as cloud computing, big data, AI and more. Optimism for US stocks has largely been supported by strong corporate fundamentals, but there are pockets for potential disappointment.

By contrast, investors in Europe are decidedly less bullish. Headlines stew over a litany of fears including the potential impacts of US tariffs, German economic stagnation, Britain’s “growth-killing” tax hikes and more. While we believe these concerns are largely overblown, they have weighed on European sentiment.

Exhibit 1 illustrates the disparity in regional sentiment. The median professional forecast for European stocks is for tepid gains whereas many forecasters are calling for better-than-average returns in US stocks. We’ve collected this type of forecast data for decades, and what we’ve observed is the market usually does something different than what professional forecasters expect. Forecasts tend to reflect well-known dynamics that stocks have already priced. Stocks typically surprise forecasts—either to the upside, downside or some other way. We believe subdued sentiment primes European stocks for upside surprise while US stocks face a higher hurdle amid optimistic sentiment.

Exhibit 1: Professional Forecasters—Wronger, Stronger for Longer

Source: Fisher Investments Research, as of 24/01/2025. Median guru forecasts for 2025 Euro STOXX 50 and S&P 500 Price Index returns.

Political and Economic Tailwinds Abound

2025 is the first year of US President Donald Trump’s second term. Historically, US presidential inaugural years have been positive about 60% of the time, but when they are positive, stock returns have been robust.ⁱ Republican presidents tend to see muted inaugural-year returns—part of what we call “the Perverse Inverse.” However, fears surrounding President Trump’s trade agenda and tariffs seem to be keeping expectations in check.

While we’ve already experienced some tariff announcements, much is still uncertain. This will be an area to watch, but tariffs typically have much less bite than people think. As President Trump’s tariffs continue to take shape and negotiations unfold, we believe their effects should prove far less sweeping than feared—bringing bullish falling uncertainty.

Elsewhere, elections in Canada and Germany as well as France’s budget battle muddied investors’ perspective as the year began. Elections can weigh on sentiment, but as they draw near candidates’ policy stances and likelihood of enacting big legislation becomes clearer, allowing stocks to move on. And so far, Canada’s election has proven little different in that regard.

Though markets were relatively unphased by the sudden resignation of Prime Minister Justin Trudeau, tough tariff talk between the outgoing PM and US President Donald Trump has prompted bouts of volatility in Canadian stocks. While we believe the reality of US tariffs likely proves more benign than expected, these political fears will eventually subside and help propel stocks higher.

Meanwhile, the global economy continues expanding. The International Monetary Fund (IMF) forecasts 3.2% growth in 2025.ⁱⁱ That is hardly gangbusters growth, but stocks typically do just fine so long as the economy expands.

A Great—But Not Necessarily Calm—Year

We believe political, economic and sentiment market drivers point to a strong year for stocks. But big returns and volatility often go together. Corrections—sharp, sentiment-induced drops of 10% to 20%—can happen at any time, for any or no reason. Just remember, stocks have risen 75% of the time across calendar years.ⁱⁱⁱ Unless there is a fundamental reason nobody is discussing that can erase trillions from the global economy, staying invested in stocks is likely appropriate for long-term investors.

Want to Dig Deeper?

In this article, we took a closer look at our outlook for stocks in 2025. For more on what we suggest investors watch out for this year, you can watch Ken’s recent video, “Fisher Investments Reviews Market Risks for 2025.”

To learn more about why we believe European stocks should lead markets in 2025, read Fisher Investments founder, Executive Chairman and Co-Chief Investment Officer Ken Fisher’s recent Globe and Mail column, “In predicting markets, the short and long term are just noise.”

For more market insights from Fisher Investments Canada, read our latest articles.

Investing in financial markets involves the risk of loss and there is no guarantee that all or any capital invested will be repaid. Past performance is no guarantee of future returns. The value of investments and the income from them will fluctuate with world financial markets and international currency exchange rates. This document constitutes the general views of Fisher Investments Canada and should not be regarded as personalised investment or tax advice or as a representation of its performance or that of its clients. No assurances are made that Fisher Investments Canada will continue to hold these views, which may change at any time based on new information, analysis or reconsideration. In addition, no assurances are made regarding the accuracy of any forecast made herein. Not all past forecasts have been, nor future forecasts will be, as accurate as any contained herein.

Fisher Investments Management, LLC does business under this name in Ontario and Newfoundland & Labrador. In all other provinces, Fisher Asset Management, LLC does business as Fisher Investments Canada and as Fisher Investments.

ⁱSource: Finaeon, Inc. as of 30/12/2024. The S&P 500 Total Return Index is based upon GFD calculations of total returns before 1971. These are estimates by GFD to calculate the values of the S&P Composite before 1971 and are not official values. GFD used data from the Cowles Commission and from S&P itself to calculate total returns for the S&P Composite using the S&P Composite Price Index and dividend yields through 1970, official monthly numbers from 1971 to 1987 and official daily data from 1988 on.

ⁱⁱSource: IMF World Economic Outlook, as of 22/10/2024, world GDP percent change, 2024 and 2025.

ⁱⁱⁱSource: Finaeon, Inc. as of 24/02/2025. Finaeon Indices Developed World annual total return frequency of positivity, 1926-2024. Presented in US Dollars. Currency fluctuations between the US dollar and Canadian dollar may result in higher or lower investment returns.