Outlook 2025: Planning for Growth and Embracing Change

by Kimberly LaPointe of Macquarie Asset Management, 1/10/25

We are coming off another great year for investors. In 2024, the global economy showed impressive strength, with the classic 60/40 portfolio1 delivering an outstanding 18.5% return, following a 13.3% return in 20232. However, every advisor knows that investors are never complacent with “more of the same.”

After another resilient year for the US economy, we look ahead to the new year. While policy could be unpredictable and volatility may be ongoing, 2025 is expected to be characterized by strong global growth.

With this in mind, as investors look to prepare their portfolios, our team share a few key themes to be considered:

Empower the future of energy and infrastructure: The surging demand for electricity, driven by changing demographics, widespread electrification and rapid digitalization presents significant investment opportunities in both public and private sectors.

Find growth in emerging markets: Capture growth by diversifying into emerging markets (EM). Allocations to EM equities offer attractive valuations and potential long-term growth driven by industrialization, urbanization, and a burgeoning middle class.

Seek intentional alpha in large-cap equities: Concentration risk may be looming, mitigate risk by diversifying large-cap equity exposure in 2025. Investors should seek true alpha drivers and explore returns beyond mega-cap stocks, leveraging skilled active managers.

Capitalize on the yield opportunity: Policy shifts and elevated bond yields in 2025 offer significant opportunities. Reallocating out of cash to capture higher yields, balancing opportunities and risks with the help of a skilled active manager that focuses on sustainable yield opportunities.

Re-examine small-caps: With projected earnings growth and potential for additional interest rate cuts on the horizon, small-cap stocks are well-positioned to deliver substantial growth. In addition to diversification benefits, many small-cap stocks are trading at attractive valuations, making them an attractive entry point for investors.