Despite relatively richer valuations, US equities are still expected to deliver decent returns in 2025, according to Deutsche Bank’s Christian Nolting who highlighted the concept of American exceptionalism as a key driver of growth.

In 2023 and 2024, the S&P 500 delivered total returns of over 50 percent, outperforming major global equity markets elsewhere. According to Deutsche Bank Private Bank’s global chief investment officer Christian Nolting, 2025 may not see such a strong showing again but underlines that it remains the case that «US stocks are the center of gravity», forecasting that the index will hit 6,500.

«US is trading certainly higher than average, with 21.7x P/E. So what we have been doing in our forecast is not to say there's multiple expansion but really build on the earnings,» Nolting said in a media briefing attended by finews.asia.

American Exceptionalism

One of the key drivers of the bank’s optimism in the US attributed to the idea of «American exceptionalism».

«US exceptionalism for us is related to the potential growth rate and that's still quite high,» Nolting explained, adding that artificial intelligence is estimated to provide an additional 3.5 percent growth.

«But even if it's [an additional] 0.5, 0.6 percent, I think that potential growth rate is higher than in many other countries. So that's not going away. The market certainly has been more expensive than others but for other markets to outperform, we need to trigger. So from that perspective, we don't think it's changing right now at this point in time.»

«Inflation is Sticky»

Nonetheless, the US is not free of risks. One concern that Deutsche Bank has highlighted is that «inflation is sticky», especially due to the prospects of increased fiscal spending. And this is expected to keep interest rates relatively higher for longer.

«Now, Trump has said he will bring down energy prices. Yes, you can try and, of course, US is self-sufficient in terms of energy supply. That's the good news. But it’s not that easy,» Nolting said with regard to the US President’s inauguration day which he perceived as a sign of continued inflation. «I think for the next one, two years, it's rather inflationary from what I heard.»