Allianz Risk Barometer 2025 -
Global risk #8: Market developments (14%)

For two years now, markets have defied gravity. Political crises and wars, rising interest rates and spiraling national debt – nothing could stop the stock markets in their tracks, they rushed from record to record. The motto: always look on the bright side. For example, after the election of Donald Trump as the 47th President of the US: in anticipation of possible tax cuts and deregulation, stock prices rose; possible tariffs and deportations were simply ignored. How long can this continue? Many companies also seem to be thinking this, with market developments climbing one position year-on-year to rank #8 among the most important business risks globally in the Allianz Risk Barometer.

Of course, there is no definitive answer to this question. But many experts believe is unlikely that there will be a major stock market correction in 2025 either. Recovering earnings and strong fundamentals should support equities. There are no signs that the artificial intelligence (A)I frenzy will stop soon as most companies have only just started to integrate AI tools in their processes, driving demand for all things related to AI. All in all, equities are projected to deliver an average total return of 8% to 10% in 2025. Nor is there likely to be any trouble on the bond side. Government bond yields are expected to remain broadly stable over the next year. The downward pressure from falling policy rates will be offset by the effects of large public deficits. But no “Liz Truss moment” (when bond markets revolted against an unsustainable budget plan) in sight (yet).

In principle, this is of course gratifying; nobody wants to see the stock market crash. However, there is a catch for Europe, according to Ludovic Subran, Chief Investment Officer and Chief Economist at Allianz: “In view of the expected tariff walls, many companies would like to increase their direct presence in the American market, including through acquisitions. While extremely high valuations and a strong dollar do not make this impossible, they do make it very expensive. It is therefore likely that, for the same reasons, but from the opposite perspective, US companies (and investment firms) will set the tone when the M&A market picks up again. From a European perspective, this competition is not taking place on a level playing field.”