2025 Market Outlook

Bridging the Divide

From Market Fragility to Portfolio Durability

Key Observations

• Full valuations, concentrated U.S. large-cap indexes and the risk of reigniting inflation are shaping the key themes we believe will drive markets and portfolio positioning in 2025.

• Recent market successes have pushed our 2025 10-year forecasts lower across most major asset classes. Long-term return premium for equities over fixed income is now at its narrowest since 2007, sparking important conversations about portfolio posture and risk allocation.

• Rising reinflation risk leads us to increase our allocation to more flexible fixed income strategies (dynamic bonds) and TIPS.

• We have modestly increased our preference for assets outside of U.S. equity to help mitigate concentration risk and skewed relative valuations.

• Moving beyond passive toward active management and alternatives may offer a compelling opportunity to enhance portfolio resilience and adapt to the shifting landscape.