Stocks to Outperform Bonds in 2025, BofA Analysts Predict
According to a recent note from BofA, analysts expect stocks to remain in vogue over bonds in 2025, driven by a combination of factors including broader profits, deregulation, and rate cuts. In contrast to their previous recommendation to favor credit in 2024, BofA now recommends allocating a greater portion of the portfolio to equities, bonds, and then credit.
The analysts forecast faster global economic growth of 3.2% and lower inflation of 2.6% in 2025, which they believe will lead to strong returns in many equity markets, ranging from 8% to 14%. Equity sectors tied to the real economy are expected to flourish, with the analysts touting a “great reversion” from the digital economy to the real economy.
In terms of specific sectors and markets, the bank recommends owning defense, industrial renaissance, liberated banks, CLO ETFs, and nuclear in the US, as well as reformist Japan, quality India, EM debt, and gold globally.
The analysts also stress the importance of a dynamic asset allocation approach, which can help boost returns without increasing volatility. They caution that consensus allocation methods, such as “buy the whole market” and target date funds, may underperform.
Overall, BofA’s analysts are predicting a strong year for equities in 2025, driven by a favorable macroeconomic backdrop and a shift towards the real economy.
