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By: Graham Wainer

Annual Investment Outlook 2025

SUMMARY

The global economy is entering a new phase of the post-pandemic expansion, characterised by complexity, volatility and geopolitical change. Though investors should take care not to overlook the potential for market fluctuation, the outlook for the year ahead is set against a backdrop of robust economic conditions and heightened US optimism.

Widespread expectations for US exceptionalism have been emboldened by the election win of President-elect Trump. Tariffs are expected to be more painful for Europe and China, where pessimism is pervasive.

The global economy is entering a new phase of the post-pandemic expansion, characterised by complexity, volatility and geopolitical change. The potential for investment volatility may be overlooked by investors.

Having rejected the widespread recessionary outlook of 2022-23, we approach the investment consensus today with a healthy dose of caution, and investigate how it might veer off course:

• Our analysis does not lead us to the conclusion that the US economy is on the precipice of recession or sustained market decline, but the possibility of a 2025 growth scare appears to be widely underestimated.
• There is little doubt that the Europe is facing multiple crises, which underpin our caution towards European assets, yet a catalyst for widely held pessimism to moderate is under close watch.
• The time may come for a bold, contrarian approach to Chinese equities which rewards such investors, but a clear (yet still absent) structural catalyst will be needed to sustain market leadership.

Higher US equity valuations in isolation do not constrain returns over the short term, but with growth expectations elevated, investors’ tolerance for disappointments is likely to be low. This means volatility can be expected to rise this year, and earnings growth will need to do the heavy lifting.

The absence of clear recessionary flags, or resurgent inflation, implies that robust real earnings growth can continue to support US equities over the long term. Opportunities for enhanced returns can be accessed through strategies which look further than yesterday’s winners.

Our multi-asset strategies, which aim to deliver compound returns in excess of inflation over market cycles, are positioned as follows:

• Equity allocations remain close to a ‘neutral’ setting overall, following disciplined rebalancing on market strength in 2024, enabling further adjustments this year as market conditions develop.
• Equity strategy blends investments in mega-caps, exhibiting strong earnings and price momentum (i.e. US AI-centric technology), with decisive allocations to global quality businesses and differentiating smaller companies.
• Diversifying asset classes, such as government bonds, physical gold, long / short active managers and insurance-linked ‘catastrophe bonds’ aim to provide uncorrelated positive returns in aggregate, creating a robust portfolio composition in the event of market volatility.

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RISK DISCLOSURE
This document has been prepared for information only and is not intended for onward distribution. It is neither an
offer to sell, nor a solicitation to buy, any investments or services. The information on this document does not
constitute legal, tax, or investment advice. It does not constitute a personal recommendation and does not take
into account the individual financial circumstances needs or objectives of the recipients. You must not, therefore,
rely on the content of this document when making any investment decisions.

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