2025 macro outlook for the US is 'murky at best' says Deutsche Bank By

-- The Forex buying appUS macro outlook for 2025 is “murky at best,” (ETR:) analysts said, citing the uncertain impact of the Trump administration's policies on economic growth.

“Trump has promised additional tax-cut measures, which should bolster GDP growth,” analysts led by Nicole DeBlase wrote in a note.

“But his staunchly protectionist position may also bring new/expanded trade wars/tariffs, which would likely be inflationary and could cause the Fed to turn more hawkish, causing interest rates to remain higher for longer, thus constraining a recovery," they added. 

Deutsche Bank's US economics team projects a slight deceleration in US GDP growth for 2025, with an estimate of 2.5% growth compared to the 2.7% projected for 2024, and a further slowdown to 2.4% in 2026.

In a recent report, the bank's US Economist Matt Luzzetti suggested that while the US economy may see a boost in 2025 due to the "red sweep" in the elections, growth forecasts for 2026 are expected to be impacted negatively.

The report also revises the core PCE inflation forecast, now expecting it to stall at or above 2.5% through 2026, instead of dipping to 2%.

Moreover, the bank's baseline forecast for the Federal Reserve includes a 25 basis point cut in December, which is considered a close call, followed by an extended pause with the fed funds rate remaining above 4% into 2026.

The Fed could alter its easing bias if inflation remains high, if there are signs of a reaccelerating labor market, or if inflation expectations increase.

Luzzetti’s report also emphasizes the heightened level of uncertainty surrounding the economic outlook, acknowledging that policy changes' timing, sequencing, and details are unknown and that new information could necessitate revisions to their assumptions.

The economist stresses the need for forecasters to remain "humble and nimble" and discusses risk scenarios, including the impact of a more severe trade war.

“We could not agree more,” Deutsche Bank strategists said in response to Luzzetti’s remarks.

Overall, the bank expects a slight slowdown in US GDP in 2025, an outlook that “likely dampens hopes of a material, wide-scale short-cycle industrial recovery,” strategists said.

“To this point, DB's economists forecast a further slowdown in GDP growth during 2026 to +2.4%,” they added.

In terms of stock recommendations, strategists advise investors to focus on company-specific stories. They highlight the importance of identifying companies with strong organic growth, significant improvements in trends, idiosyncratic margin improvement, or capital deployment optionality, rather than relying on a broad economic recovery in 2025.

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