Institutional Insights: Societe Generale 2025 US Equity Strategy
Societe Generale 2025 US Equity Strategy
Executive summary
US. From inauguration day to the first 100 days and beyond. The three big positives under the new US government: 1) lower taxes to accelerate ‘reshoring’; 2) lower regulation with a focus on ‘supply side’ reforms; and 3) lower oil price to keep inflation in check. On the flip side, risks are tit-for-tat tariffs, causing inflation to rise and fiscal indiscipline, driving the cost of borrowing even higher. Trump 1.0 showed tax-cuts were announced before the tariffs to insulate the markets. Post the first 100-days, the Fed, inflation, tariffs and fiscal anxiety will feed into the market. S&P 500 front-loaded returns. In June, we flagged the upside risks of the S&P 500 reaching 6,666 on lower oil prices and an AI-boom. With Trump reflationary polices, the S&P 500 could reach 6,500 by April and end the year at 6,750 (25x trailing P/E on US$267 ’25 EPS). The S&P 500 is increasingly sensitive to US 10y yields, we see a wide range of 3.75–4.75%, implying the S&P 500 could oscillate between 6,500-7,500 in 2025.
American exceptionalism stays in the game. US equities are expected to provide two-thirds of the profit growth contribution in 2025, driving even higher the share of US profits within global equities; profits should keep the excessive valuation in check. Our S&P 500 2025 EPS growth estimate unchanged at US$267 (+11%). With strong profits, the only reason to be bearish today is: there is no reason to be bearish (i.e. sentiment for the US is bullish already). The best time for stock pickers in 25 years. The correlation of stock performances has dropped to the lowest reading in 25 years, the signals under the strong S&P 500 return show we are in one of the best periods for alpha generation. Thematic trades present a compelling opportunity. ‘America first’ thematic baskets. The ‘de-risking’ China policy is unfinished business. The theme of long SG US Reshoring beneficiaries has further potential, with lower domestic manufacturing taxes.
We introduce the “SG Domestic Supply-Chain” basket, which is exposed to companies with local US exposure and local supply chains. Note: under the Trump 1.0 tariff war, local supplychain Industrials outperformed those with global supply chains. SG Turning Point Signals stay positive for 18 months. The SG Global Cycle Indicator has been positive since 2Q23, and the SG Consumer composite has consolidated in positive territory in 2024. The cyclical sectors’ EPS continue to make new highs. Stay exposed to US cyclicals: Financials, Industrials, Consumers. Selective Tech. Hedge stagflation risk in 2H.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!