As highlighted in Pathstone’s 2025 Investment Outlook, we anticipate positive if slightly uneven global economic growth in 2025, led by the U.S. economy.  Investors are sharpening their focus on the new U.S. administration’s proposed fiscal, immigration, regulatory, and trade policies. The impacts of these policies, as well as military tensions across borders, will be watched closely for signs that the drivers of economic growth could be stymied.

The more things change, the more they stay the same. Outside of the largely duration-driven (for now) investment grade fixed income markets, the environment for credit and credit alternatives remains attractive, albeit complex. (i.e., return exceeding the risk-free rate). For traditional high yield and bank loans, the strength of corporate profits and resiliency of the economy anchors a favorable fundamental outlook. If 2025 mirrors 2024 in that the health of the economy remains the prevailing driver of returns in credit, investors should achieve the targeted excess yield in these non-investment grade securities.

Now that President Trump has taken office, investors are sharpening their focus on the administration’s proposed fiscal, immigration, regulatory, and trade policies. We shared our initial thoughts on likely shifts in policy in our Post-Election Economic and Market Outlook back in November. While it remains challenging to predict outcomes given razor-thin congressional margins, we offer this update (as of January 14) on the evolving policy landscape and its potential impact on both the real economy and the markets during 2025 and into 2026.