Investing.com – Bank of America analysts on Tuesday outlined 10 unexpected scenarios that could shape financial markets in 2025.
These scenarios are viewed as high-impact and contrarian opportunities that BofA believes some investors may have overlooked.
Profitability >20% for the third year in a row: Despite Wall Street consensus predicting growth of 10%, BofA suggests that the combination of a productivity boom, corporate tax cuts and stable passive fund flows could fuel another year of returns above 20%.
Work rates: Contrary to the view that tariffs are an ineffective tax, BofA argues that “tough love” toward countries with large trade surpluses can spur U.S. manufacturing growth, supporting employment and raising wages.
Capital expenditures unlocked by deregulation: Deregulation, led by new government efficiency initiatives, could significantly reduce bureaucratic barriers, free up business investment and stimulate economic growth.
AI is running out of training data: BofA states that “2025 could be the year that enthusiasm for AI fades as reality sets in.” The bank says the rapid development of artificial intelligence could hit a bottleneck as the industry runs out of human-generated training data, potentially slowing the pace of innovation.
Bond buyers become refuseniks: With households suffering significant Treasury losses, BofA suggests a potential shift in which domestic buyers could pull back, impacting the sustainability of government debt.
The Eurozone is freed from budget restrictions: The bank says a possible shift in German fiscal policy driven by economic pressure could lead to increased investment in energy and defense, turning European equities into attractive value opportunities.
Strengthening yen weighs on rising US stocks: According to BofA, the strengthening of the Japanese yen, combined with tightening monetary policy, could lead to a reversal in capital flows, which would negatively impact the growth of US equities.
Demand for alternatives creates supply: “Insatiable” demand for private assets could lead to increased access through ETFs and 401(k) plans, but also raises concerns about market transparency and valuation, the bank says.
Submarine cable sections: Bank of America is warning that geopolitical tensions could escalate due to deliberate disruptions to undersea cables, threatening global communications and financial networks.
The fragility of the power grid leads to widespread power outages: Aging infrastructure and the emergence of intermittent renewable energy sources could lead to costly power outages, the bank warns, adding that this highlights the need for significant investment in grid resilience.