Top Economic Trends For 2025: Four Things to Starting Talking to Wealthy Clients About

In the Chinese zodiac, 2025 is the Year of the Snake, and begins on January 29^th. People born in the Year of the Snake (2013, 2001, 1989, 1977, 1965 and 1953) are said to be intuitive, strategic, and intelligent. The snake is a symbol of shedding skin, which can encourage people to renew their perspectives and let go of outdated beliefs. The snake is also associated with wisdom, charm, elegance, and transformation. The year is said to be a time for introspection, intuition, and adaptability. 

If you believe in the stars, 2025 is predicted to be a year of powerful transitions for some zodiac signs, with the potential for new beginnings and fresh starts. Taurus, Leo, Scorpio, Sagittarius, and Aquarius are all set for a lucky and prosperous 2025. Positive changes could include career moves, relationship changes, or fresh life perspectives.

But how about the UK economy? Following a challenging 2024, it is actually expected to grow by c. 2.0% in 2025, according to the Office for Budget Responsibility. The British Chambers of Commerce also expects household consumption to increase in 2025 due to lower inflation and expected interest rate cuts. Furthermore, the International Monetary Fund projects that the global economy will grow at 3.2% in 2025. Although all of these projections will now need to be reviewed however in light of Donald Trump’s impending return to the White House.

In this article we explore the economic trends which may shape and context your discussions with your high-net-worth and ultra-high-net-worth clients in 2025.

 

Interest rates will continue to cool globally 

Interest rates are on course to fall to 2.75% by next autumn in the UK, according to economists at investment bank Goldman Sachs. The Federal Reserve is also predicted to continue lowering rates into 2025, having cut rates in September for the first time in over four years. S&P Global Ratings economists believe the European Central Bank will cut interest rates in each of the next four quarters too, and Banco de México (Banxico) is expected to ease interest rates further by early 2025.

This cooling of interest rates is set to lead to improved spending globally, boosting the economy and leading to increased demand for goods and services. This can of course increase inflationary pressures but it’s also very likely to increase borrowing and help provide a helpful booster to the property market at all price points. In fact, after the base rate reduction in August, lenders have already confirmed cuts to variable rate mortgages in the UK. This is good news but high-net-worth clients may need help navigating the Stamp Duty surcharge on second homes which rose by 3% to 5% from 31 October 2024, according to Labour’s new budget. Plus, as demand increases property prices may rise faster and intensify competition for the most desirable properties. Increasing emphasis on quick decisions and moving quickly to ensure property is secured at the best sale price.

 

Global political landscape set to stabilise

2024 has been an historic election year, with elections in 50 countries and billions of voters having headed to the polls globally including in the United States, India, the UK, Mexico and South Africa. Particularly in countries which aren’t believed to operate a free and fair system, elections can spur instability, insecurity and violence. However, if we look at the US election and the magnitude and decisiveness of Trump’s victory and the grace which flowed from Kamala Harris when conceding, elections can also be unifying.

The good news is that there are a lot less elections in 2025, and this will hopefully lead to a more stable political landscape, which is good for the world economy. In short, stability creates certainty which in turns breeds confidence. The new UK  labour government continue to bed in of course, which means that consumer and business confidence post budget can continue its return in the UK with full knowledge of how the ensuring tax agenda has been set for the next parliament. After the inauguration in January, hopefully the budget dust will also begin to settle in the US, but the world will be keeping a close eye on what Trump’s appointment means for policy. There could be many more changes afoot although the response of the stock market and even cryptocurrency values has been extremely positive so far.

 

AI stocks to remain strong

The S&P 500 reached record highs in 2024, largely fuelled by the magnificent seven stocks and shares including Nvidia, Microsoft and Apple. Artificial Intelligence is the driving force behind the success, and experts at JP Morgan predict that AI will drive another ten years of stock market dominance.

Economist Neil Shearing predicts that the S&P 500 will see a further 27% increase in the next year, rising to a benchmark index of 7,000. So, if you’re discussing investments with your clients, US equities – particularly big tech - should definitely be a consideration. In the same way many fintech companies are starting to reach scale, offering potential IPO opportunities. Of course without a crystal ball its difficult to know which will perform best in the mid to long term, but growth of both fintech and AI sectors seems inevitable.

 

Super prime property bubble continues

The super prime property boom is also set to continue in major cities such as London, New York and Dubai, attracting the wealthiest buyers.

In 2023, sales of properties worth over AED5 million ($1.36 million) and AED10 million ($2.7 million) in Dubai reached record levels and the demand for luxury properties in Dubai continues to grow, driven by the city's reputation as a global business hub. As global wealth continues to increase, Dubai remains at the forefront of luxury real estate demand.

Speaking at Spear’s 500 Live this year, Mayfair property guru Peter Wetherell told the audience he believed property agents were living in a golden decade. In London, the super prime property market continues to grow, but with VAT on school fees and business rates on private schools set to increase under the new Labour regime (which could push private school fees up further), many affluent families are considering moves to areas with Ofsted outstanding public schools instead. Our recent article covers some of the best Ofsted rated areas in London and throughout the UK. Although for the very wealthiest the additional of VAT will be easily absorbed.

New York City has a wide variety of super prime and ultra prime property, and despite a sharp decline during the pandemic, these markets have nearly returned to their peak sales figures from 2016. Since 2003, there have been a total of 146 apartment sales of over $40 million in Manhattan. American hedge fund manager, entrepreneur, and investor Ken Griffin’s $238 million purchase at 220 Central Park South remains the most expensive apartment sale in the city (and the country as a whole), but watch this space as it could well be topped in the not too distant future.

 

Always staying on top of things

It's definitely never been more important to keep abreast of both micro and macro changes, with 2024 showing the unpredictability that interestingly inhibits key trends which can make forecasting difficult. Of course the best strategy is to stay informed and in touch with developments, especially as deal and transaction complexity is also on the rise. There is no longer a ‘standard deal’ and often pathfinding solutions is challenging, which is why 2025 will also be the year where expertise and experience matters most when it comes to high value finance.

 

If you’re a private client adviser or mortgage introducer then there is much to look forward to in 2025, which looks set to be a fruitful year for you and your clients. To discuss how we can assist your clients with their high value finance needs please contact Toby Johncox at [email protected]