In developed economy elections around the world in 2024—from France to the United Kingdom to Japan to the United States—voters demanded change, as the lingering squeeze from prior years’ inflation ignited a desire to punish incumbents. In each country, the circumstances beyond inflation differ and the policy consequences will diverge. But change is in the air, with meaningful economic and market implications across each major economy.

This is an analysis of the forces that are most likely to impact markets in this unusually uncertain year.

In the United States, significant policy changes could materially affect global growth, US inflation, and corporate profitability.

China will be at the center of the storm and is likely to respond to US protectionism with asymmetrical retaliatory measures and substantial fiscal and monetary stimulus.

The Eurozone is likely to be tested by US trade policy, fiscal pressure from higher defense spending, and the potential security threat from an emboldened Russia.

Japan will struggle to balance the benefits of positive inflation against voter anger over cost-of-living increases and the desire to stabilize the yen.

The geopolitical backdrop is likely to shift meaningfully as the United States retrenches from multilateralism and diminishes its commitments to mutual defense treaty partners.

The changing global backdrop could significantly affect prices across asset classes, with elevated dispersion within them. Investors will therefore need to reevaluate likely winners and losers across countries, sectors, and companies.

Investment implications

The biggest challenge from a market perspective lies in quantifying the independent effects of potential policy changes and then attempting to understand how these countervailing impacts will interact.

For example, economists can estimate the inflationary and growth impacts of increased tariffs, but even these estimates are subject to large error bands.

Several questions remain unanswered: When will tariffs be applied? Will they be applied all at once, or gradually over time? Which items will they be applied to? Will they be applied uniformly? If not, what will the nuances be?

Predicting the customer responses to policy changes is also imprecise. For example, if one million undocumented immigrants were deported in 2025, what might that mean to wage growth by sector? How will compensation increases resulting from deportations affect broader price levels? Even more difficult to forecast is the impact of broad price-level increases on wage demands in sectors that are not directly impacted by deportations.

Finally, there is the complexity of measuring the impact that deregulation and lower tax rates could have on the “animal spirits,” or psychology of all market participants.

With that cautionary note in mind, my base case expectation is that inflation will increase moderately in 2025 due to tariffs and modest increases in consumption driven by wealth effects and optimism around perceptions of a more growth-oriented economic agenda.

In 2026, I expect further increases in inflationary pressure as immigration policies and tariffs accumulate. With this backdrop, I see the US 10-Year Treasury yield moving back toward 5% and the fed funds rate staying at or above 4%.

While it might be tempting for investors to extend duration in their portfolios if the 10-year Treasury reaches a 5% yield again, I would caution against any excessive reallocation. This is because the shifting policy backdrop could lead to a sustained grind higher in US government financing costs as key policy changes reignite inflation and budget deficits remain elevated.

To the extent Fed independence is also called into question against a backdrop of elevated inflation and deficits, rates could rise sharply.

With trade and immigration policy depressing growth and raising inflation, while deregulation and tax policy increase corporate profitability, I would expect credit spreads to remain tight as recession risk appears low.

However, if I am wrong, the accumulated uncertainty created by so much change and an escalating global trade war could at some point negatively impact investor psychology, leading to wider credit spreads and perceptions of increased recession risk. Put simply, my preference remains to be more exposed to intermediate-duration and higher-quality borrowers rather than reaching for yield in riskier areas, such as the high yield market or leveraged loans, given the outsized risk of an unexpected downturn.

For US equities, the initial response to the US election was positive as investors focused on the obvious tailwinds to profitability: lower corporate tax rates and less regulation. However, I expect much more dispersion within the equity market when the reality of a much-less-friendly trade environment sets in. Some companies, such as those in the financial services and energy sectors, will be less vulnerable to tariffs while others, such as those in the consumer discretionary arena, will be much more

In the immediate aftermath of the US election, non-US equities initially underperformed US peers. However, 2025 could present an excellent opportunity to add capital in non-US markets as investors recalibrate assumptions regarding the relative winners and losers from the reshaping of global supply chains against an evolving geopolitical backdrop.

In three of the last five quarters, foreign direct investment into China has been negative, and I expect to see more capital being redirected away from China in the years ahead.

Looking beyond geography, I continue to believe the two most transformational economic themes in our lifetimes will be the advent of artificial intelligence (AI) and the energy transition. Investors are fully engaged in the AI trade but are increasingly discarding shares related to clean energy.

I believe a great investment opportunity could be in the making, as climate change continues unabated and the profit opportunity from investing in both mitigation and adaptation grows. In the case of AI, the most attractive near-term opportunity might still be in the market leaders, but I believe it will increasingly shift to the companies that effectively deploy AI into their operations in a way that generates meaningful returns on investment.

By Ronald Temple, chief markets strategist, Lazard

Launched with initial funding from a diverse group of family offices in the US, the Fund is designed to mirror the strategy of the company’s existing India equity UCITS fund, the Chikara Indian Subcontinent Fund, which has grown in AUM to over USD $100m this year.

The new Chikara India Equity Fund is a Cayman-domiciled, monthly-dealing, long-only equity fund. The Fund has no performance fee, does not trade derivatives as part of its strategy and applies an annual management charge of between 50 and 100bps.

The portfolio will hold approximately 25-30 stocks, with the fund managers selecting high-growth and high-quality companies optimally positioned to benefit from India’s impressive domestic growth.

The Fund’s investment approach is high conviction, index-agnostic, with a concentrated focus on companies benefiting from India’s robust domestic prospects. The India growth story is well-documented, the demographic trends well known; India’s age dependency is significantly lower than the world average, and its GDP looks set to double to more than $7.5 trillion by 2030.

This will make India the third largest economy behind China and the US.

Abhinav Mehra, co-manager of the new Chikara India Equity Fund, and Chikara Indian Subcontinent Fund, said: “The top-down macroeconomics are, of course, compelling. As GDP per capita grows from approximately USD $2,500 towards USD $5,000, some companies in currently underpenetrated sectors such as insurance, mortgages and private healthcare should benefit disproportionately and grow faster than the 7% growth predicted for India itself as affordability improves and penetration rates rise.

“Within those domestic sectors, we select companies with stringent governance in place that we have known for many years and are confident entrusting client capital to. In our view, this is a once in a generation economic transition that we aim to capitalise on and believe will be fruitful to US investors, providing them access to this under-served and secular element of India’s growth story.”

James Tollemache, chief executive of Chikara Investments, said: “Many investors talk about being exposed to India domestic growth, but this portfolio is without question giving investors that pure play exposure. Most of the revenue in this portfolio is generated domestically rather than from export earnings, which really differentiates the Chikara India Equity Fund in the market.

“In launching this Fund, we have responded to clear interest and demand from US investors. They have plenty of exposure to global and US growth in their portfolios already, not least the magnificent seven, but this Fund tapping into India’s under-penetrated domestic-focussed high-growth story provides something different. Chikara India team’s proven strategy appears to be unlike any other fund in the region.”

Alongside the India equity strategies, Chikara Investments manages Japan equity funds through the Chikara Japan Income and Growth Fund, and the investment trust CC Japan Income and Growth, both managed by Richard Aston. The firm launched the long only Chikara Global Emerging Markets Opportunities Fund (a subfund of the existing Irish UCITS product) managed by Jonathan Asante and his team at the end of 2023.

Its “exclusive partnership” comprises more than 100 of the “world’s most respected and successful insurance brokers”, Assurex Global said in a statement. adding that it “stringently selects its Partner Firms to ensure they adhere to the highest quality, expertise, and customer service standards”.

The partnership currently includes two long-standing, “best-in-class” firms in the UK, Griffiths & Armour in Liverpool, and Broadstone Financial Solutions in London.

“The addition of Alexander Beard Group is an exciting and strategic step in Assurex Global’s continued dedication to growth and to broaden its reach and service capabilities”, the statement said.

Alexander Beard Group, founded in 1987 by executive chairman Paul Beard, initially provided financial planning and investment management services to music and entertainment industry clients. The company quickly expanded its client base to include professional football players.

Beard said: “We are excited to join the highly regarded Assurex Global Partnership. This strategic move enables us to extend our networking reach and collaborate with the best independent brokers worldwide. We are eager to provide our clients with more exceptional service and personalized solutions.”

In addition to its HQ , ABG has two UK wealth management branches in London and West Yorkshire; internationally it operates offices in Perth, San Mateo, Lyon, Johannesburg, Frankfurt and most recently in November 2022 opened an office in Dublin, Ireland.

Its comprehensive offering includes individual wealth management, pensions and investment advice, together with its proprietary AB International Retirement Plan and employee benefits.

Assurex Global President & CEO Dean Hildebrandt said: “We are thrilled to continue expanding our Partnership with the inclusion of Alexander Beard Group.

“They have shown extraordinary commitment to their clients over more than three decades, and we are confident this election will further strengthen our Partnership and perfectly complement the two outstanding existing Partner Firms we have in the United Kingdom.”

The Alexander Beard International Retirement Plan, targeting globally mobile employees in the NGO and international schools’ market, as well as global companies employing short term contractors, was launched in 2008.

Alexander Beard now has many of the largest and most recognized American headquartered NGOs, covering staff in Africa, the Middle East, Southeast Asia, and South America.

Its best-in-class approach to financial planning and wealth management, outstanding customer service, and innovative solutions make it a noteworthy addition to Assurex Global Partnership, Assurex further said.

This comes a couple of weeks after Smart closed its $95m (£76m, €87m) Series E funding in a round led by private investment firm Aquiline Capital Partners.

ProManage offers managed retirement savings accounts and other personalised retirement solutions.

With this acquisition, Smart’s global assets under management are now over £8bn ($9.5bn, €9.3bn). The acquisition of ProManage will bolster Smart’s suite of financial wellbeing and retirement savings technology across the globe.

ProManage’s existing leadership team will remain in place.

Transform

Andrew Evans and Will Wynne, co-founders of Smart, said: “The acquisition of ProManage perfectly aligns with our commitment to deliver innovative technology for retirement planning. This acquisition is a testament to our ongoing mission to transform retirement, savings and financial wellbeing, across all generations, around the world.

“We are excited to bring the ProManage team into the Smart family, and we are united in our vision to transform the retirement marketplace to the benefit of savers across the globe.

“Accelerating through the milestone of £8bn billion assets under management is evidence of the strength and resilience of our business, whether that’s our fast-growing UK master trust, our expanding international partnerships, or through strategic acquisitions.

“We continue to transform retirement, savings and financial wellbeing by bringing clients onto our industry-leading platform, Keystone. More people than ever are now saving their money through Smart, and the strength of our industry-leading platform, Keystone, has been an important driver of that.”

This was part of its 2023 Dirty Dozen campaign to crackdown on tax avoidance.

The IRS said that schemes can take many shapes, ranging from “abusive deals involving syndicated conservation easements and micro-captive insurance arrangements”, and they can also involve an international component, such as “hiding cash and digital assets offshore or using Maltese foreign individual retirement accounts or foreign captive insurance”.

Danny Werfel, IRS commissioner said: “These tax avoidance strategies often target high-income individuals seeking to reduce or eliminate their tax obligation.

“Sometimes taxpayers are conned into believing they can participate in these schemes. People should always look for advice from an independent, trusted tax professional, not a promoter focused on aggressively marketing and pushing questionable transactions.”

Malta

The annual Dirty Dozen campaign – a list of 12 scams and schemes – featured Malta-based individual retirement arrangements “misusing treaty”, the IRS said.

The US taxman said that the arrangements involve US citizens or residents attempting to avoid US tax by “contributing to foreign individual retirement arrangements in Malta, or potentially other host countries”.

The IRS added: “Participants in these transactions typically lack any local connection to the host country, and unlike US law for individual retirement arrangements, the host country’s laws allow for contributions in a form other than cash and do not limit the amount of contributions by reference to employment or self-employment activities.

“By improperly asserting the foreign arrangement as a ‘pension fund’ for US tax treaty purposes, the US taxpayer misconstrues the relevant treaty provisions and improperly claims an exemption from US income tax on gains and earnings in, and distributions from, the foreign individual retirement arrangement.”

Offshore accounts and digital assets

During the Dirty Dozen list, the IRS said that “international tax compliance remains a high priority” for the US taxman.

The US taxman said it is scrutinising taxpayers attempting to hide assets in offshore accounts and accounts holding digital assets, such as cryptocurrency.

The IRS said: The IRS reminds US persons that they are taxable on their worldwide income, unless they can establish there is a statutory or treaty exemption.

“The IRS continues to identify individuals who attempt to conceal income in offshore banks, brokerage accounts, digital asset accounts and nominee entities. The IRS scrutinises structured transactions, private annuities, employee leasing schemes, foreign trusts, the use of nominee ownership and other arrangements used to conceal taxable income, beneficial owners and assets.

“To complement its enforcement investigations, the IRS requires individuals holding foreign assets and third parties to report to the IRS on foreign assets, foreign accounts, foreign entities and digital assets. Reporting requirements carry penalties for failure to file.

“Asset protection professionals and unscrupulous promoters continue to lure US persons into placing their assets in offshore accounts and structures, saying they are out of reach of the IRS. Similarly, unscrupulous promoters recommend digital assets as being untraceable and undiscoverable by the IRS. These assertions are not true. The IRS can identify and track anonymous transactions of foreign financial accounts as well as digital assets.

“Many of these schemes are promoted and advertised online, but all these schemes have one thing in common – they promise tax savings that are too good to be true and will likely cause legal harm to taxpayers.”