Economic and Market Outlooks for the Year Ahead

Next year’s outlook emphasizes growth from easing policies, AI and infrastructure.

As retirement investment planners look to 2025, a collective pivot by central banks toward easing monetary policy will be a defining theme shaping markets, according to analysts and strategists from leading financial institutions that serve defined contribution investing.

This lower-rate environment will, at times, fuel other trends that will further shape the economic and investment landscape, including increased use of transformative technologies in infrastructure investment. But, perhaps more than usual, geopolitical shifts may upend even the best forecasting.

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Below are some of the key market factors to watch heading into 2025.

Easing Monetary Policies

In their annual outlooks, J.P. Morgan Asset Management, Invesco and T. Rowe Price underscored the significance of synchronized rate cuts by central banks worldwide—what they described as a coordinated action following a period of aggressive rate hikes aimed at controlling inflation.

J.P. Morgan predicted these measures will benefit fixed-income markets and commercial real estate, but cautioned they may fall short of fully revitalizing growth.

Invesco’s outlook envisioned a “soft landing” for the global economy, with initial deceleration giving way to reacceleration in the latter half of 2025. It also projected growth in the U.S. to be soft before rebounding, supported by easing financial conditions and a resilient labor market. Meanwhile, regions such as the eurozone and the U.K. are likely to recover from sluggish growth or recession, aided by moderate real wage growth.

T Rowe Price added that relaxed financial conditions have already boosted consumer wealth and balance sheets, fostering optimism in the markets. However, slower job creation may temper gains, even as productivity improvements and robust real disposable incomes provide a tailwind for growth.

Investment Strategies: Diversification and Resilience

Equities and fixed-income assets offer mixed opportunities as investors navigate the post-pandemic recovery, according to Columbia Threadneedle.

The firm projected selective gains in U.S. equities, tempered by the expectation that 20% to 25% annual growth rates are unlikely to continue. The asset manager also emphasized that while lower rates and strong earnings create a favorable backdrop, geopolitical uncertainties and labor market changes could challenge sustained growth. The firm advised investors to focus on companies with solid fundamentals and those exploring opportunities beyond U.S. markets, particularly in Europe, where valuations are attractive.

Fixed-income markets, meanwhile, are positioned for a strong performance in 2025. Attractive yields, coupled with central bank rate cuts, create opportunities for healthy returns, according to Columbia Threadneedle analysts. Bonds are regaining their role as portfolio stabilizers, offering protection against market shocks.

Housing and construction remain areas of interest, with J.P. Morgan noting persistent demand for homebuilding despite affordability challenges.

Goldman Sachs added that infrastructure investment is evolving in response to demographic and technological shifts. Aging populations are reshaping public spending priorities, increasing demand for private funding in sectors such as health care and retirement infrastructure.

J.P. Morgan recommended portfolios that blend fixed-income assets, real estate and dividend-paying equities to balance income generation with growth potential. Similarly, Columbia Threadneedle highlighted the value of selective stock and credit selection to navigate risks while capitalizing on opportunities.

Technology and Productivity

Asset managers see artificial intelligence driving changes across industries in 2025, particularly in the U.S., where J.P. Morgan predicted AI will transform health care, pharmaceuticals and white-collar work.

Globally, automation and infrastructure electrification are expected to yield significant productivity gains, further enhancing economic resilience, according to the firm.

Goldman Sachs also highlighted the expanding role of AI in infrastructure, including data center development and transport electrification. These advancements align with thematic trends, such as sustainable energy investments and evolving supply chains driven by trade fragmentation.

Recent surveying has also shown that financial advisers may be utilizing AI more in their practices in the coming year. According to BlackRock Inc. surveying released in September, 53% of advisers are planning to implement AI, a jump from 44% the prior year.

Infrastructure Investment

Goldman Sachs’ 2025 outlook emphasized the evolution of infrastructure investment amid moderating inflation and shifting market dynamics.

The report also identified a bifurcation in infrastructure investment structures. Evergreen models cater to large, yield-focused core assets, while drawdown funds are better suited to opportunistic investments requiring disciplined exits.

Thematic opportunities include sustainable energy, AI-driven expansion and aging populations, which are reshaping public budget priorities and increasing reliance on private infrastructure funding, according to the firm.

Geopolitical Uncertainty

Political risk and rising government debt remain significant challenges for 2025. J.P. Morgan cautions that these factors could spur market volatility, urging investors to balance growth strategies with robust risk management. Globally, regional variations add complexity to economic outlooks, according to Invesco.

The investment manager pointed to Japan as a standout performer, buoyed by recent wage growth and favorable policy adjustments. Conversely, China’s policy stimulus may provide only limited reflationary impact on its regional neighbors, even as it supports domestic growth. Emerging markets, particularly India, show promise due to domestic demand and advantageous demographic trends. Meanwhile, escalating conflicts in Eastern Europe and the Middle East, while primarily a humanitarian crisis, also threaten to disrupt trade routes and drive volatility in commodity prices.

In the U.S., markets are grappling with the uncertainty surrounding President-elect Donald Trump’s legislative agenda, which remains undefined but carries significant policy and portfolio implications, according to Goldman Sachs. Potentially pro-growth measures such as looser fiscal policies, lower corporate taxes and lighter regulation could boost economic momentum.

However, Goldman Sachs stated the possibility of trade protectionism poses risks, including slower growth and short-term inflation spikes. Economic data fluctuations may trigger growth-driven sell-offs, as seen in August’s market volatility.

401(k)s and the Courts in 2025

Plan forfeiture court decisions, Loper Bright’s use and potential DOL guidance shifts are all on the table, according to ERISA experts.

2025 may be an active year for both attorneys and plan fiduciaries working with employer-sponsored retirement plans.

First, there are 401(k)-related cases already in motion that may start to be clarified by court decisions, including the raft of plan forfeiture and pension risk transfer lawsuits that hit this year. Then there is the likely use and effects of the Loper Bright decision, which overturned decades of judicial deference to federal agencies. And that’s all before potential moves by the new administration and Congress regarding the Department of Labor’s Retirement Security Rule; environment, social and governance investing guidance; and the use of cryptocurrency in defined contribution plans.

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Plan Forfeiture Cases

In the 12 months through October, there were more than 20 cases filed in various federal district courts against plan sponsors alleging the misuse of retirement plan forfeiture assets, according to Daniel Aronowitz, president of Encore Fiduciary, which offers fiduciary liability insurance to plan administrators.

“Plaintiff law firms have figured out that the easiest way around the pleading standard [or rules that govern how parties present their claims] that we’ve been fighting about for years is to just use the magic words: plan forfeitures,” Aronowitz told an audience at PLANADVISER 360 in Scottsdale, Arizona, on November 12.

Aronowitz said that before these cases, fiduciaries had been assuming that plan forfeitures were a settlor, not fiduciary function—meaning their setup was not held to a fiduciary standard. The recent complaints are challenging that by questioning the use of forfeitures, even in some instances where their use was clearly laid out in the plan setup.

Drew Oringer, a partner in and general counsel at Wagner Law Group, says the plaintiffs’ bar is attacking plan forfeitures to see if courts will engage on the question of whether there is a fiduciary claim to how a forfeiture was set up by a firm, even if the plan documentation was clear.

“There are a lot of plans in the market that have the kind of provisions that are potentially open to question under the law,” Oringer says. “The question is going to be: Which courts look at this and say, ‘There is no fiduciary claim at all,’ ‘There is a fiduciary claim, but we don’t see it as a viable one,’ or, ’There’s a fiduciary claim, and we see it as a viable one’? … What the plaintiffs’ lawyers want here is to see a significant number of courts putting it into that last bucket.”

If district, and then circuit, courts were to find viable fiduciary claims, then plan fiduciaries will likely start to settle the cases, rather than go through costly legal battles, Oringer says. In turn, the market might then start to adjust, with plan fiduciaries being “less discretionary” in how the plan is teed up to use plan forfeitures.

If, on the other hand, the cases are dismissed at the circuit level, then plan sponsors will likely “leave their plans as they have been for decades,” he says.

Aronowitz expressed the view that, if it was less costly for plan sponsors to go to trial in such cases, he believes they would be more likely to fight the charges, win and tamp down further suits from the plaintiffs’ bar.

Pension Risk Transfer Litigation

Aronowitz also pointed to a raft of pension risk transfer cases to be worked through that target plan sponsors doing PRTs with Athene-backed annuities, which the complaints allege are not safe long-term, guaranteed-income options.

Athene Holding Ltd. has not been named as a defendant in those cases, and the Apollo-backed firm, the largest seller of retail annuities in the U.S., has vehemently denied the claims.

“I don’t think there is standing in those cases,” Aronowitz said. “But it’s a potentially new issue [for plan sponsors] as to whether you can only go to the safest annuities on the market or what those even are … it remains unclear at the moment.”

The DOL, for its part, reviewed the rules around pension risk transfers, known as IB 95-1, in 2024. While it decided not to offer any amendments or additional guidance, it did not rule out doing so in the future.

Loper Bright

A widely covered U.S. Supreme Court decision made earlier this year is also likely to play a role in ERISA-related cases in 2025. On June 28, the Supreme Court issued a decision in Loper Bright Enterprises v. Raimondo that overturned the precedent set by the 1984 ruling in Chevron v. Natural Resources Defense Council Inc. That so-called Chevron doctrine had called on courts to defer to federal agencies’ interpretations of federal law when deciding cases, including those involving the DOL and the IRS.

Due to Loper Bright, the courts no longer need to defer, and they can rule on the merits of the case as they see them. Experts say that may embolden plaintiffs’ attorneys to bring complaints against plan fiduciaries. But it may also be used by defendants to plead their case directly to the court, as opposed to assuming deference to regulations, notes Stephanie Gutwein, a partner in Faegre Drinker Biddle & Reath LLP.

“You are definitely going to start seeing Loper Bright be used,” Gutwein says. “We have clients where it’s on the table, and we’re discussing it in many client counseling situations.”

As district courts rule on cases, it may make plan administration more difficult for large, multi-state employers who will need to negotiate disparate rulings, Gutwein notes.

Gutwein and colleague Joelle Groshek, an associate at Faegre Drinker, recently wrote about a case that showed potential hurdles to using Loper Bright to overturn past cases. In Cogdell v. Reliance Standard Life Insurance Co., a district court applied Loper Bright and another Supreme Court ruling, Corner Post Inc., v. Board of Governors of the Federal Reserve System, to reject a defendant’s attempt to argue that a regulation was invalid.

The result of that case is pending circuit review. But Groshek says it shows a potentially high bar in using Loper Bright for benefit disputes that are not, on their face, going after the regulations themselves. These types of everyday benefits cases differ, she notes, from when complaints are being filed directly against federal regulations—such as the DOL’s fiduciary rule that has been stayed by two Texas courts.

“Unless a regulation gets taken out altogether, you are likely going to see some inconsistent decisions,” Groshek says.

Trump Administration

Finally, ERISA experts believe there may be relevant changes as early as next year resulting from the 2024 election results. Lawyers from Lathrop GPM point to three regulatory areas to watch.

First, they are expecting that “changes to the definition of fiduciary investment advice are likely to be shelved by the new administration, as the defense of rules issued in 2024 is unlikely to continue,” according to a write-up led by Allie Itami, a partner in Lathrop GPM’s business transactions group.

The second area is related to ESG-related investment rules for retirement plans. The firm expects guidance to switch back to the prior Trump administration’s “pecuniary factors” that must be prioritized over any other considerations.

Third, employee stock ownership plans may not see long-anticipated regulation regarding “adequate consideration”—the pricing of the shares in ESOP plans—which can be difficult to gauge due to the small market for such shares.

“Although a proposal was sent to [the Office of Management and Budget], finalizing a regulation may not be high priority for a de-regulatory administration,” the attorneys wrote.

There are, of course, other plan litigation issues that may emerge in 2025 that only the plaintiffs’ attorneys are yet aware of, points out Wagner Law’s Oringer.

“It’s hard to say what the next big thing will be, because it’s a question of what the plaintiffs’ lawyers come up with,” Oringer says. “They’ve shown themselves to be very creative in the past in coming up with areas they believe may lead to settlements.”

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