Bank of Singapore shares its top five high-conviction investment ideas for 2025, adding that markets are positioned for a «volatile but fruitful year».
In 2025, Bank of Singapore forecasts that world GDP will grow 3 percent, according to a report, which is lower than the OECD’s calculation of 3.2 expansion in 2024. The bank predicts that the US, Eurozone and China will grow 2 percent, 0.8 percent and 4.2 percent, respectively.
In terms of equity returns, its base case is for 11 percent upside in the S&P 500, 20 percent upside in MSCI Asia ex-Japan and 17 percent upside in the Hang Seng Index.
Under such an environment, Bank of Singapore has highlighted five high-conviction investment ideas for the year. They include a focus on US stocks, generating equity alpha, caution on higher yields, gold and «supertrends».
US Equity Bull Intact
First, Bank of Singapore believes that the case for the US bull remains. Although it expects consolidation in the first half due to market digestion of the risks of higher long-dated US Treasury yields and a less dovish than anticipated Fed path, it is positive for the overall year.
«While a consolidation phase for US equities is probable in 1H2025, our base case is that the broader uptrend is intact and likely to power on to our target of 6,530 by end-2025,» the bank said. «Bottom line: US equities could go through a consolidation phase but the broader uptrend is intact. Buy on any weakness ahead.»
Generate Equity Alpha
Second, focus on generating equity alpha rather than relying on market beta. The bank notes that while the Magnificent 7 stocks are «candidates for a mania-like overshoot», they are also a source of concentration risk as they now make up more than 30 percent of the S&P 500.
«As such, for fresh capital, there is better risk-reward to be found in quality value stocks outside of the Magnificent 7, especially in our favored sectors: technology, healthcare, and consumer staples and discretionary,» it said.
Cautious of Higher Yields
According to the report, the bank expects further upward pressure on long-dated US Treasury (UST) yields with a 12-month 10Y UST yield forecast of 5 percent. It also forecasts that the Fed will make just two 25 basis point rate cuts in 2025 as inflation rises due to drivers such as tariffs and tax cuts.
«Therefore, we remain cautious of duration risk and hold an overall Underweight position in fixed income in our tactical asset allocation.»
Gold Still Shines
Fourth, the bank sees more upside for gold as US President-elect Donald Trump’s policies and rising debt are likely to worsen the appeal of US assets.
«We keep our 12-month gold price target unchanged at $2,900/oz and see the asset as an effective portfolio diversifier as uncertainties relating to US fiscal sustainability and global geopolitics remain heightened and as global central banks continue to add to their gold holdings.»
Focus on Supertrends
Finally, the bank also advises investors to focus on long-term, structural supertrends. It highlights five key themes: the changing World Order; activating asset allocation; finding AI in real life; powering ahead; and living 2.0.
«Investors should position themselves for a volatile but fruitful year that is characterized by resilient growth fundamentals, heightened geopolitical uncertainties, and firm tailwinds from structural themes,» said the report authored by Eli Lee, Bank of Singapore’s chief investment strategist.
