Construction Costs Ease, but challenges remain

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While inflation has begun to slow across the Americas, the construction industry remains under strain. A combination of new tariffs, labor shortages, and rising material prices continues to challenge businesses heading into 2025. 

The slowing of inflation has brought some relief, with construction costs falling below their 5- and 10-year averages. However, industry leaders remain cautious. 

“Our survey shows that general contractors expect permitting times will continue to be a major pain point as well, leading to project delays and more uncertainty,” said Brian Ungles, President, Project & Development Services, Americas. 

Office construction has taken a hit, with new office space down by 40% year-over-year. This has led to increased demand for renovations and fit-outs in existing offices. As a result, landlords are offering higher tenant improvement packages, but these come at a cost. Some markets have seen TI allowances jump by 20% in the past year. 

“While new office construction pipeline has decreased, costs for all construction will continue to rise with more fill-out activity in existing offices and the strength of new construction in other sectors,” said Richard Jantz, Tri-State Lead, Project & Development Services. 

For those looking to plan office upgrades or new construction projects, Cushman & Wakefield’s 2025 Americas Office Fit Out Cost Guide is offering in-depth analysis of 58 markets. This guide includes updated costs for a range of construction trades. 

While inflation slows, rising materials costs and the complex challenges of labor shortages and tariffs ensure that the construction landscape will remain turbulent. As projects move forward into 2025, businesses must carefully plan and adjust to these ongoing pressures.

The Tariff Heading Continues With Corrections in the Bags and the Managers Adjusting Their Scenarios

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The world’s major economies are making their move in response to the Trump administration’s tariff game. Meanwhile, markets are feeling the impact of commercial and geopolitical uncertainty, and investors are beginning to consider a scenario of economic recession in the U.S. alongside rising inflation. This heightened volatility translated into another turbulent session on Wall Street, with declines in the S&P and Nasdaq, as well as European stock markets falling for the fourth consecutive session (EuroStoxx 50 -1.4%; Ibex -1.5%).

“The fear of a U.S. economic recession and its spillover to the rest of the world, partly driven by Trump’s unstable trade policy in these early months of his term, is leading to profit-taking after an excellent start to the year for European stock markets,” explain analysts at Banca March.

According to Gilles Moëc, chief economist at AXA IM, “there is a revolutionary atmosphere in Europe.” He believes that “the reaction of EU institutions and national governments to the U.S. challenge has been quicker and stronger than expected.” He warns of two key issues: first, “whether national governments have the willingness and capacity, given already unstable fiscal positions and watchful markets”; second, “the magnitude of the multiplier effects that this additional spending will have on GDP, both in Europe and in Germany,” a country about which he notes, “the revolution could be relatively painless.”

Where Are We in This Tariff Game?

To summarize quickly, Trump has implemented 25% tariffs on all steel and aluminum imports, with Canada, Brazil, and Mexico being the most affected. Additionally, the U.S. president has threatened to double tariffs on Canadian steel and aluminum to 50%, in response to a 25% increase in the electricity price Ontario exports to the United States.

On the receiving end of these new tariffs, the latest response has come from the European Union. Ursula von der Leyen, president of the European Commission, has just announced countermeasures worth €26 billion, which will affect U.S. products such as textiles, appliances, and agricultural goods starting April 1. The European Commission “regrets the U.S. decision to impose such tariffs, which are unjustified and harmful to transatlantic trade, damaging businesses and consumers and often resulting in higher prices.” Brussels estimates that these tariffs on steel, aluminum, and derivative European products will have an impact of around $28 billion.

How Much and How the Landscape Has Changed

In response to this situation, international asset managers are adjusting their scenarios. According to Lizzy Galbraith, political economist at Aberdeen Investments, the rapid adoption of executive measures by President Trump, particularly in trade, has led them to update their outlooks from several important perspectives.

“We now see the U.S. weighted average tariff rate continuing to rise to 9.1%. We assume a reciprocal tariff will be implemented, though with several exemptions. We anticipate higher general tariffs on China and more sector-specific tariffs, including those applied to the EU, Canada, and Mexico. Additionally, the risk that trade policy becomes even more disruptive has increased,” she notes.

Galbraith acknowledges that their “Unleashed Trump” scenario assumes reciprocal tariffs are systematically applied and include non-tariff trade barriers, while the United States-Mexico-Canada Agreement (USMCA) collapses entirely. “This results in the average U.S. tariff reaching 22%, surpassing the highs of the 1930s,” she explains.

The Aberdeen Investments political economist believes that the economic fundamentals remain strong. However, she acknowledges that “our updated baseline political expectations, along with the risk bias in our forecasts, will present headwinds for U.S. economic growth and inflation.”

Finally, according to Enguerrand Artaz, strategist at La Financière de l’Echiquier (LFDE), part of the LBP AM group, “the market scenarios that prevailed at the beginning of the year have been erased.” Artaz explains that the U.S. exceptionalism that had been shining for the past two years—and that consensus expected to continue—is now faltering. “Weighed down by the collapse of the trade balance, driven in turn by a sharp increase in imports in anticipation of tariff hikes, U.S. growth is expected to slow significantly, at least in the first quarter. On the other hand, Europe, a region in which very few investors had any hope at the start of the year, has returned to center stage.”

Implications for Investments

Given this backdrop, Amundi‘s latest Investment Talks report states that “the Trump trades are over, and the market rotation away from major U.S. tech stocks continues.” They explain that despite the recent sell-off, they believe the expected correction in excessively valued areas of the U.S. equity market could continue, leading to further rotation in favor of Europe and China.

“In fixed income, it is crucial to maintain an active duration approach. Since the beginning of the year, we first became more bullish on European duration, and more recently, we have started moving toward neutrality. We have also shifted to a neutral stance on U.S. duration and expect the U.S. 2-10 year yield curve to steepen. Regarding credit, we remain cautious on U.S. high-yield bonds and prefer investment-grade European credit. As our original euro/dollar target of 1.10 approaches, we expect volatility to remain high and believe there is still room for further dollar correction. Overall, we believe it is essential to maintain a balanced and diversified allocation that includes gold and hedges to counter the increasing downside risk in equities,” Amundi analysts state.

Meanwhile, BlackRock Investment Institute highlights that political uncertainty and rising bond yields pose risks to growth and equities in the short term. “We see further upward pressure on European and U.S. yields due to persistent inflation and rising debt levels, although lower U.S. yields suggest markets expect the typical Federal Reserve response to a slowdown. However, we believe that megatrends like artificial intelligence (AI) could offset these drags on equities, which is why we remain positive over a six- to twelve-month horizon,” they indicate in their weekly report.

Farmer Confidence Rises as Conditions Improve on U.S. Farms

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U.S. farmers had already begun 2025 with an optimistic outlook, and their sentiment further improved in February. The Purdue University-CME Group Agricultural Economy Barometer rose to 152, an 11-point increase from the previous month.

An improvement in the current situation of U.S. farms was the main driver of stronger sentiment among producers, as the Current Conditions Index reading was 28 points higher than in January.

However, there was little change in producers’ assessment of future prospects, with the Future Expectations Index rising only 3 points in February to reach 159.

This latest increase in the Current Conditions Index capped off a long recovery from the stagnation seen in late summer and early fall of 2024, when the index hit a low of 76.

A strong rebound in crop prices in recent months—boosted by expectations of disaster payments authorized by Congress—combined with the strength of the U.S. livestock sector, contributed to a more positive assessment by producers regarding conditions on their farms and in the broader agricultural sector.

Despite the significant improvement in the Current Conditions Index, the Future Expectations Index for February remained 22 points higher than the current index, suggesting that farmers expect conditions to improve even further.

Meanwhile, the Agricultural Capital Investment Index rose 11 points to 59 in February. This reading also marked the most positive investment outlook reported by farmers since May 2021.

Interestingly, in February, it was a stronger assessment of current conditions—rather than heightened expectations for the future—that helped push the index upward. The Farm Financial Performance Index stood at 110, remaining virtually unchanged from 111 the previous month. While the index showed little change from January, it still reflects a significant rebound compared to last fall, when it fell to a low of just 68.

ICBA Payments Partners With Mastercard To Modernize Community Banking

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ICBA Payments has partnered with Mastercard to upgrade card and payment services for 1,400 community banks. The collaboration enhances security, streamlines digital payments, and improves customer experiences.

“By partnering with Mastercard, we’re equipping our member banks with secure, cost-effective solutions to support and grow their communities,” said ICBA Payments CEO Jacob Eisen. 

These payments will upgrade its sponsored card programs to Mastercard at no cost, introducing contactless payments, digital wallet tokenization, and optimized business BIN structures. Mastercard will manage cardholder communication and provide assets to boost engagement. 

“Together, we are enabling community banks to drive financial empowerment, foster local growth, and create a more connected and resilient future for every community they serve,” said Marie Elizabeth, US Market Development Mastercard executive president. 

ICBA payments support community banks through innovation and advocacy, collectively managing over $43 billion in credit and debit sales. This partnership strengthens local economies all while delivering secure, modern payment solutions.

The U.S. ETF Industry Bets on a Dual Share Class Structure

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Asset managers are generally optimistic about the possibility of a future approval of the dual-class share structure. Most ETFs issuers stated that they expect active mutual funds (74% of applicants) and passive mutual funds (26%) to incorporate ETF share classes for approval.

Furthermore, 93% of active applicants requested such an exemption in their applications as of December 2024, according to the latest report by consulting firm Cerulli Edge—U.S. Product Development Edition.

The appeal of the dual-class share structure makes sense from a product development perspective, as such approval would greatly benefit both financial advisors and end investors by expanding investment options and simplifying the process for those seeking greater exposure through their preferred structure.

According to Cerulli’s survey, 69% of ETFs issuers indicated that they have already submitted exemption requests, while 29% are planning to apply at a later date or are considering a dual-class share structure initiative and monitoring developments (29%).

SEC filings from various applicants clearly list advantages such as “lower portfolio transaction costs,” “greater tax efficiency,” and an “additional distribution channel for asset growth and economies of scale” concerning ETF share classes in mutual funds, as well as “efficient portfolio rebalancing” and “greater basket flexibility” for mutual fund share classes in ETFs, noted Sally Jin, an analyst at Cerulli.

“Other arguments in favor of the dual-class share structure point to ongoing initiatives that offer similar benefits—such as cloning mutual fund strategies in ETFs and converting mutual funds to ETFs—which simultaneously respond to investor demand and pose fiduciary challenges that the dual-class share structure might be better suited to address,” she added.

However, significant regulatory and distribution challenges persist, and it remains to be seen whether the SEC will approve these measures and, if so, what they will entail exactly, according to the Boston-based consulting firm.

The SEC has raised numerous concerns, including excessive leverage, conflicts of interest, investor confusion, the risk of cross-subsidies, discrepancies in cash redemptions and fund expense payments, and unequal voting power.

Regarding distribution, ETF managers cited the main obstacles as brokerage firms’ reluctance to approve or make ETF share classes available on platforms (54%), the operational complexity of managing mutual fund and ETFs share classes (43%), and asset managers’ reluctance to provide transparency into mutual fund strategies (29%).

Additionally, 69% of ETF asset managers agreed that adopting the dual-class share structure would be more significant for registered independent advisor (RIA) channels, compared to 42% of firms that expressed the same view regarding central offices.

“Despite these obstacles, half of the asset managers who responded to Cerulli’s survey remain optimistic about the possibility of future approval of the dual-class share structure, although the timeline for such approval remains uncertain,” Jin stated. “The growing number of applicants, who make up a significant portion of the investment sector, could be a decisive factor,” she concluded.

Trump, Central Banks, or the Climate: What Dynamics Are Driving the Commodities Market?

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Even as the world enters a phase of deglobalization, the connection between markets and the global economic and geopolitical landscape remains strong. That is why international asset managers are closely watching how the commodities market is responding to expectations surrounding steel and aluminum tariffs, a potential U.S. recession, increased spending in Europe, possible sanctions on Russia, and shifts in energy demand—a long and complex list of factors.

According to Marcus Garvey, Head of Commodities Strategy at Macquarie, their economists have revised global GDP growth projections for 2025 down to 2.2% year-over-year, expecting expansion to slow to a quarterly low of 0.3% in Q3 2024.

He explains that the possibility of tariffs on commodity imports has driven up duty-free prices in the U.S.

“This has led to increased demand for materials that can be moved to the U.S. before potential tariffs are imposed, as seen in the growing gold reserves within the country. However, this merely brings forward demand, and once there is tariff clarity, these additional purchases should subside. Furthermore, once tariffs are confirmed, excess inventory in the U.S. is likely, and the resulting price hikes for consumers could lead to demand destruction,” Garvey adds.

He also notes that the reciprocal tariffs expected after April 1st may be lower than the market anticipates, which could provide some relief.

Garvey’s base-case scenario is that weakening global demand for goods and slower industrial production growth will negatively impact primary commodity consumption.

“We therefore expect most commodity prices to decline in the second half of the year, with most physical commodity trade balances posting global surpluses. However, gold is a notable exception—given the U.S. fiscal deficit shows no improvement, it could test its all-time high of around $3,500 per ounce,” he states.

Tariffs: The Impact on Steel and Aluminum

The 25% tariffs on steel and aluminum announced by the U.S. are now in effect, significantly impacting Australia, Canada, Argentina, and the European Union.

Garvey explains that these tariffs will be implemented through the reinstatement and extension of the Section 232 tariffs from 2018. “This means the same mechanism cannot be easily used to impose tariffs on other commodities in the short term, as it would first require an investigation by the Department of Commerce. As a result, recent volatility in copper spreads on the CME and LME, as well as in the exchange-for-physical (EFP) prices of precious metals, may have been excessive. Still, prices remain vulnerable to broad-based tariffs or country-specific tariffs affecting a large portion of U.S. imports,” he says.

According to Garvey, while some of these costs will be passed on to U.S. processors and consumers, a portion of the tariffs will be absorbed by exporters, as their best net-margin strategy remains delivering to the U.S. Given the greater availability of materials outside the U.S., this could put downward pressure on regional prices elsewhere.

“In steel, there is room for a supply response that could mitigate this situation. However, for aluminum, we do not expect any smelters to restart production. Ultimately, demand will be key in determining the extent of sustained cost pass-through, and we still see the overall backdrop of rising trade tensions as a bearish factor for industrial metal prices,” he adds.

Crude Oil Market and the Impact of Russian Sanctions

In the oil market, projections suggest that supply will continue to outpace demand in 2025 by approximately 1 million barrels per day. However, market perception varies—while sour crude buyers face supply shortages, light sweet crude buyers see a well-supplied market.

Norbert Rücker, Head of Economics and Next Generation Research at Julius Baer, notes that with oil hovering around $70 per barrel, it appears to be stabilizing after its recent drop.

“Market sentiment is cooling, and uncertainties around economic outlooks and oil demand are keeping prices under pressure. Beyond geopolitical noise, structural shifts appear to be taking shape,” Rücker explains.

He argues that increased production from oil-producing nations is intensifying competition in the crude market, which is likely to limit U.S. shale oil’s market share.

“U.S. dominance is facing broader scrutiny. From a fundamental perspective, we believe the oil market is heading toward a surplus, with prices declining to around $65 per barrel by the end of the year,” he states.

Additionally, the impact of Russian sanctions remains a crucial factor.

Vikas Dwivedi, Global Energy Strategist at Macquarie, explains that if sanctions remain in place, reduced Russian exports to India, China, and Turkey could drive a significant price increase. Conversely, if sanctions are weakened or lifted, crude could drop by $5–$10 per barrel.

“While the public focus has been on the U.S. back-and-forth over tariff announcements and suspensions, we believe Russian sanctions could have a much greater impact on crude prices throughout at least the first half of the year. If sanctions on Russia are not eased, the ongoing decline in shipments—currently around 1 million barrels per day—could continue and become a catalyst for a major price surge,” he warns.

Gold’s Surge Amid Economic and Political Uncertainty

No commodities discussion is complete without mentioning gold, which has risen 50% in a year—and may not stop there.

Matthew Michael, Chief Investment Officer at Schroders, explains that a year ago, gold prices began to break out of their previous stagnation.

“At the time, the rally was fueled by major central banks increasing their gold purchases to reduce reliance on U.S. dollar reserves and Treasury holdings amid rising uncertainty. This partially broke gold’s historical correlation with real (inflation-adjusted) interest rates. Additionally, Trump’s trade war will further boost the precious metal,” he states.

Meanwhile, Charlotte Peuron, a precious metals fund manager at Crédit Mutuel AM, adds that gold continued its 2024 uptrend into January 2025, driven by economic and political risks (trade wars, U.S. inflation, political instability, etc.).

She notes that Western investor demand for gold is rising, both through ETFs and physical deliveries.

“China, in addition to central bank purchases, has just launched a pilot program allowing insurance companies to invest in gold for their medium- and long-term asset allocation strategies. All signals are green, which should support gold demand. Silver is also rallying, up 12.8% since the beginning of the year, reaching $32.60 per ounce,” she adds.

Agricultural Commodities: The Coffee Price Surge

One notable commodity trend is the relentless rise in coffee prices. Since early 2024, the price of high-quality Arabica beans—known for their smoother, less bitter taste—has risen by about 90%, while Robusta beans—typically used for instant coffee—have increased by over 90%.

Michaela Huber, Senior Cross-Asset Strategist at Vontobel, attributes this mainly to climate conditions.

“Brazil, which accounts for nearly 40% of global coffee production and is the top supplier of Arabica, has suffered from a devastating combination of frost and prolonged drought. In Vietnam, the world’s second-largest producer and the top supplier of Robusta, extreme weather fluctuations—droughts followed by heavy rains—have also wreaked havoc. As a result, crop yields have plummeted, reducing supply,” she explains.

Huber warns that unless harvests improve or consumers significantly cut back on consumption, the price rally could persist.

PGIM Fixed Income Welcomes Daleep Singh Back

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PGIM Fixed Income announced the return of Daleep Singh as vice chair, chief of global economist, and head of global macroeconomic research, effective April 21, 2025. 

Sing rejoins the firm after serving as U.S. deputy national security advisor for international economics and deputy director of the National Economic Council from February 2024. He previously held these roles from 2021 to 2022, advising President Biden on economic policy at the intersection of economics and national security. 

Before his time in government, Singh was PGIM Fixed Income’s global chief economist and head of macroeconomic research from 2022 to 2024. 

In his new role, Singh will oversee the global macroeconomic research team and play a key part in expanding PGIM Fixed Income’s global presence. He will also be on the senior leadership, reporting to Gregory Peters, co-chief investment officer. 

“Daleep’s extensive experience and insight at the highest levels of government will be fundamental in helping our firm navigate the increasingly complex macroeconomic and geopolitical forces driving global financial markets,” said Peters.

Singh’s previous roles include executive vice president at the New York Federal Reserve and positions at the U.S. Department of the Treasury and Goldman Sachs, focusing on U.S. interest rates and emerging markets. 

“I’m excited to return to PGIM Fixed Income and contribute to the firm’s success during this transformative period,” said Singh. 

Singh’s return strengthens PGIM Fixed Income’s leadership as it continues shaping the future of global investment strategies. 

Ben Harper Joins I Squared Capital as new Managing Director, Head of Sustainability

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I Squared Capital has announced the appointment of Ben Harper as Head of Sustainability. Based on the firm’s Miami office, Harper will oversee sustainability initiatives and climate risk mitigation strategies across I Squared Capital’s portfolio assets. 

Harper brings extensive experience in ESG leadership. Before joining I Squared Capital, he served as Managing Director, Head of ESG at Stonepeak, where he played a pivotal role in integrating sustainability across investment strategies.

“We are delighted to welcome Ben,” said Sadek Wahba, Chairman and Managing Partner at I Squared Capital. “We are confident that Ben’s expertise and leadership will further enhance our overall efforts to create long-term value for our stakeholders,” he added. 

Beyond his corporate experience, Harper has actively shaped public policy and industry best practices. His contributions include work with the White House Interagency CCS Task Force and the European Union’s Zero Emission Platform. 

Additionally, he served on advisory boards for organizations such as the American Society of Civil Engineers Infrastructure Resilience Division and the United States Principles for Responsible investment Infrastructure Advisory Committee. 

Harper’s expertise in sustainability and infrastructure resilience will enhance I Squared Capital’s ongoing efforts to create long-term value for its stakeholders. 

Assets in Tokenized Investment Products to Reach $317 Billion by 2028

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Innovation in investment products is essential for asset managers to adapt to new market opportunities and shifting investor preferences. In the past, financial engineering played a key role in the evolution of investment vehicles, but now, technology is emerging as the primary driver of innovation.

According to the 2024 Asset and Wealth Management Report by PwC, one of the most prominent trends is the growth of tokenized investment products.

“In our base-case scenario, we project that assets under management in tokenized investment funds—including mutual funds and alternative funds, but excluding mandates—will grow from $40 billion in 2023 to over $317 billion by 2028,” the report states.

PwC explains that while this still represents a small fraction of the total market, it is expanding at an impressive compound annual growth rate (CAGR) of over 50%. This surge is driven by the need for greater liquidity, enhanced transparency, and broader investment access, particularly within alternative funds, which may include private equity, real estate, commodities, and other non-traditional assets.

The PwC report highlights that tokenization is providing investors with greater opportunities to diversify their portfolios into digital asset classes, especially as regulatory restrictions gradually ease.

According to the report’s conclusions, this innovation allows asset and wealth management firms to diversify portfolios, access non-correlated asset classes, and attract a new generation of tech-savvy clients.

“Currently, 18% of surveyed asset and wealth managers offer digital assets within their product offerings. While these products are still in their early stages, investor interest is growing. Eight out of ten managers who offer digital assets have reported an increase in inflows,” the report states.

PwC identifies a second major advantage of tokenized investment products: the ability to develop applications and platforms that enable retail investors to purchase fractional shares in private markets or tokenized funds.

“Tokenized fractional ownership could expand market opportunities by lowering minimum investments and allowing traditionally illiquid assets to be traded on secondary markets,” PwC analysts explain.

In fact, the survey highlights strong interest in tokenized private market assets from both asset managers and institutional investors, with more than half of each group identifying private equity as the primary tokenized asset class.

Nearly 8 in 10 Workers Report Concern Over Rising Medical Costs

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MetLife’s 2025 U.S. Employee Benefit Trends Study paints a concerning picture for today’s workplace, revealing significant drops in holistic health -5%, productivity -5%, and engagement -7%. Financial stress is a major factor, with 77% of employees citing rising medical costs and 68% pointing to economic uncertainty as their main sources of stress. 

In the face of these challenges, employees increasingly turn to their employers for support and stability. The study reveals that 81% of employees believe their employer should build trust in the workplace, and employees are 1.5 times more likely to trust their employer than other institutions. 

With responsibility to foster trust comes a significant opportunity for employers to improve workplace outcomes. MetLife’s research shows that employees who trust their employer and feel cared for are 3.8 times more likely to feel holistically healthy, 2.4 times more engaged, and 1.9 times more productive than those who don’t experience this care. 

Employers can build trust by creating a supportive workplace culture and offering benefits that are easy to understand and use. It’s important to give employees opportunities to provide feedback and help them make the most of their benefits. 

“Our research shows that employers who demonstrate they care for their employees see better workplace health and results,” said Todd Katz, head of Group Benefits at MetLife. 

The study also finds that employees who use their benefits effectively are 2.4 times more likely to feel holistically healthy, 2.1 times more likely to trust their employer during tough economic times, and 1.8 times more likely to trust their employer’s leadership. 

“Benefits give employees stability and protection in uncertain times, which strengthen trust,” Katz added.

To help employees make informed decisions about their benefits, MetLife offers tools like Upwise, reminders, and guidance. In 2024, 64% of employees who had access to Upwise during enrollment used it, and 84% of those completed the steps to get a benefits recommendation. 

MetLife’s study found that employers who prioritize employee care, build trust, and offer clear benefits experiences can foster a more engaged, productive, and healthy workforce.