Technology, U.S. banking and gold, Julius Baer’s bets for a highly volatile 2025

The arrival of Donald Trump to the White House with threats of a tariff war, the disparate monetary policy between Europe and the United States and the start of peace negotiations in Ukraine promise a highly volatile 2025. Julius Baer is betting on a continuation of the expansive cycle already experienced by the markets in 2023 and 2024, but with an extra ingredient of uncertainty and concern that could cause a scare among investors if there is any bad news that questions the high valuations. In that scenario, the private bank's bets are on technology, U.S. banking and gold, as Almudena Benedit, the head of the entity's management area in Spain, explained at a meeting with the press in Madrid.

"We are not worried about volatility, it can even be a healthy thing. In 2024 there were not many opportunities to enter equities. It is healthy for there to be some volatility and for valuations to be adjusted," said Benedit. In this sense, he detailed that the firm is overweighting technology stocks, because although they already have high valuations, they are supported by the profits they are delivering. The question going forward is whether firms that are investing huge volumes of money in AI will be able to monetize them, and in that sense, he points out that any negative surprises could trigger corrections like the one that occurred in Nvidia after the Deepseek earthquake.

On the other hand, Julius Baer is also confident in the performance of the financial sector, especially in the United States. "We are overweight in U.S. banking. The financial sector is in a very good solvency situation and we still like it, it is not overpriced. It is a favorable sector," said the head of Julius Baer's management area in Spain. The monetary policy of the central banks must be taken into account. While the European Central Bank (ECB) is in the midst of de-escalating rates - the experts at Julius Baer estimate that it will continue to cut rates to 1.75% - the Federal Reserve has paused its cuts in the price of money and the bank expects that it will not make any additional cuts this year, due to the expansionary policies of Donald Trump's government, which, in theory, could increase inflation. This monetary policy would benefit the U.S. financial sector more than the European one, since they will obtain more income thanks to the interest generated by variable rate loans.

Julius Baer is also betting that gold will continue its climb. "We are very positive on gold because central banks are increasing purchases, especially India and China, because reserves are below average and it is a way of protecting against the risks of investing in bonds," said Almudena Benedit. According to the bank's estimates, it could reach 3,000 dollars an ounce within a year and even exceed that figure. At the beginning of 2025, the precious metal has been one of the star assets, with a revaluation of more than 11%.

On the other hand, the Swiss bank is also betting on industrial stocks, Germany, Japan and China. "China has structural problems due to the real estate crisis. The government has approved stimulus measures and there is some improvement. It is a concern in the medium and long term, but in the short term we think it can do well," said Benedit.