Investing.com -- ocks are likely to remain in vogue over bonds next year, supported by a risk-on cocktail of broader profits, deregulation, and rate cuts, analysts from BofA said in a recent note.
"We favor an allocation to equities > credit > bonds in 2025 on broader profits, higher productivity, deregulation & rate cuts," BofA analysts said.
The bullish call on equities marks a shift from 2024, when BofA favored credit.
The macroeconomic backdrop is expected to support equities, the analysts said, forecasting faster global economic growth of 3.2% and lower inflation of 2.6% in 2025, with central banks likely to cut interest rates. This environment is expected to deliver strong returns in many equity markets, ranging from 8% to 14%, they added.
Equity sectors tied to the real economy are likely to flourish, the analysts said, touting what they describe as a "great reversion" from the digital economy to the real economy.
"Position for a great reversion in the US via: defense, industrial renaissance, liberated banks, CLO ETFs, natural gas for today, and nuclear for tomorrow," they said.
Globally, the bank recommends owning "reformist Japan, quality India, EM debt, and gold."