Macro views

Market volatility predictions for 2025

December 18, 2024 - 5 min read

Vice President and Portfolio Manager – Gateway Investment Advisers, LLC

We think that geopolitical risks certainly remain elevated going into next year and have for a couple of years now. Those are always underpinning market uncertainty. We also think changes with the new administration as it pertains to things like tariffs, and global trade, will be supportive of higher levels of volatility, and could result in shocks into next year for certain sectors in the market. And then finally, we think there are reflationary concerns as it pertains to those tariffs and how that might impact interest rates in 2025.

We see an improving fundamental backdrop for US equities. We see broadening earnings growth throughout the market. In fact, in the S&P 500, earnings growth is expected to increase for every single sector within the index for the first time in a few years. And we also see deregulation and lower taxes encouraging a pretty constructive market environment, as well.

We think that options are particularly well-suited to manage risk in the current interest rate environment. Options are influenced primarily by two things-- overall levels of market volatility, but also interest rates. And both of those things are supportive of the risk management characteristics that options are embedded with to help manage risks associated with equities. We also think that this is a very good environment for quality investing. Higher interest rate environment tend to be a little bit more difficult for companies, particularly, companies that rely on debt. We think that quality investing and focusing on companies with very strong balance sheets will be a theme that will do well in 2025.

As we move into 2025, the market is expected to experience higher levels of volatility, according to Gateway Portfolio Manager Daniel M. Ashcraft, CFA^®. Here, he discusses what may cause spikes in volatility and which strategies can be employed to manage risks.

Key takeaways

Market volatility will probably remain elevated in 2025.
The Trump administration's policies are likely to create a constructive environment for US equities.
Investors may want to consider employing option-based strategies and focusing on quality investing.

Geopolitical risks and policy changes

Geopolitical risks continue to be a major source of uncertainty in the market. These risks have been elevated for a couple of years and are expected to remain so in 2025. Additionally, policy changes, particularly those related to tariffs and global trade, are anticipated to contribute to higher levels of volatility. The Trump administration's policies, including deregulation and lower taxes, are expected to create a constructive market environment for US equities.

Impact on investment landscape

The new administration's policies are likely to have a positive impact on the investment landscape. Earnings growth in the S&P 500^® Index is expected to increase for every sector within the index for the first time in years. This, coupled with deregulation and lower taxes, is anticipated to foster a favorable market environment for equities.

Strategies for managing risk

We believe options are particularly well suited to manage risk in the current interest rate environment. Options are influenced primarily by two things – overall levels of market volatility and interest rates. Both are supportive of the risk management characteristics that options are embedded with to help manage risks associated with equities.

Investment ideas

Gateway Fund GTEYX

Natixis Gateway Quality Income ETF GQI

Gateway Equity Call Premium Fund GCPYX

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All investing involves risk, including the risk of loss. Investment risk exists with equity, fixed-income, and alternative investments. There is no assurance that any investment will meet its performance objectives or that losses will be avoided. The views and opinions are as of December 4, 2024, and may change based on market and other conditions. This material is provided for informational purposes only and should not be construed as investment advice. There can be no assurance that developments will transpire as forecasted. Actual results may vary. Although Natixis Investment Managers believes the information provided in this material to be reliable, including that from third party sources, it does not guarantee the accuracy, adequacy or completeness of such information.

Derivatives involve risk of loss and may entail additional risks. Because derivatives depend on the performance of an underlying asset, they can be highly volatile and are subject to market and credit risks.

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Natixis Advisors, LLC provides advisory services through its division Natixis Investment Managers Solutions. Advisory services are generally provided with the assistance of model portfolio providers, some of which are affiliates of Natixis Investment Managers, LLC.

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