Year Ahead 2025

Since the start of the 2020s, global equity markets are up by around 50%, US nominal GDP has increased by over 30%, and US corporate profits are up nearly 70%. All that in spite of unprecedented global lockdowns, the outbreak of wars in Eastern Europe and the Middle East, and the largest spike in interest rates and inflation in decades.

The market and economic developments have led some to term the decade so far as the “Roaring 20s,” marked by high economic growth, strong market returns, and improving productivity.

We are now approaching the midpoint of the decade, and the implications of the US election result are a focal point. A key question is whether US political change might extend or end the Roaring 20s.

The upside scenario would see lower taxes, deregulation, and trade deals adding to a positive market narrative built on solid growth and continued investment in artificial intelligence. The risk scenario is that trade tariffs, excessive fiscal deficits, and geopolitical strife will contribute to higher inflation, weaker growth, and market volatility.

As we consider a wider range of market outcomes ahead, the unpredictability of this decade so far should remind us of the importance of humility and market diversification. But it should also remind us of the adaptability of the economy, the power of innovation, and the potential for long-term market growth.

In Year Ahead 2025, we highlight the investment opportunities and strategies to help investors capture opportunities and manage risks as the decade enters its next stage. 

In our base case, we believe that central banks are poised to cut interest rates further in the year ahead and that returns on cash will fall. As such, we believe investors should position for lower rates by putting cash to work in investment grade bonds, diversified fixed income strategies, and equity income strategies to sustain portfolio income.

We continue to believe that artificial intelligence is positioned to be the investment opportunity of the decade. To capitalize, investors should focus on both listed megacaps and innovative private companies. Rising electricity demand and decarbonization goals should also create a significant long-term opportunity in companies related to power and resources.

We think there is more to go in equities. With markets powered by falling interest rates, solid economic growth, and transformational innovations, we expect the S&P 500 to reach 6,600 by the end of 2025—around a 10% price return from current levels. Tariffs and geopolitical uncertainty are likely to contribute to volatility for European and Chinese markets in the year ahead.

While tariffs are a concern, they should not completely overshadow the opportunities outside the US. We see value in maintaining diversified exposure to Asia ex-Japan. Korea’s and Taiwan’s exports, crucial to global supply chains, are less likely to be affected by tariffs owing to their non-substitutable nature. India offers a compelling domestic growth story, and we remain positive on China’s internet stocks, which could benefit from potential stimulus measures. In Europe, our focus is on small- and mid-cap stocks in the Eurozone, as well as Swiss high-quality dividend payers.

In currencies, tax cuts, immigration controls, and tariffs are likely to provide short-term support for the dollar. While further near-term strength cannot be ruled out, we believe the dollar is currently overvalued and overextended. Investors should consider selling further dollar strength.

In commodities, we expect gold to break new highs and anticipate higher prices for “transition” metals like copper, lithium, and nickel. We also think the outlook for global residential and commercial real estate is bright amid constrained supply and rising demand.

Beyond some of the specific ideas we present in this Year Ahead, we also provide a number of strategic focus areas that can help investors plan ahead and build better long-term portfolios.

These include: putting cash to work, strengthening your core, diversifying with alternatives, optimizing leverage, being active with managing your investments, and considering going sustainable.

By thoughtfully embracing near-term opportunities within the framework of a well-crafted strategic plan, we are confident that investors can build resilient and profitable portfolios. As we reach the midpoint of this dynamic and transformative decade, we extend our best wishes for a prosperous and successful year ahead.