The global economic landscape continues to evolve, and 2025 promises to be a year of adaptation and resilience. As the world adjusts to a structurally higher inflationary environment, the global economy is showing signs of slowing, albeit with surprising pockets of strength. Geopolitical and fiscal shifts are further reshaping market dynamics, making this a pivotal year for investors to navigate opportunities and risks with precision.
Headed into 2025 we maintain our conviction in backing winners. Our stance remains firm from 2024: U.S. equity markets will continue to outperform their international counterparts, led by the dominance of large-cap companies. As we enter the new year, our focus is on capitalizing on emerging investment trends while remaining cognizant of evolving macroeconomic headwinds. By focusing on key resilient themes, from booming infrastructure investments to the persistent growth of corporate profits, investors can position themselves to navigate the challenges and capitalize on the opportunities of 2025.
US Equity Commentary by Stu Strasner, CFA
As a long-time student of history, I often reference the book The Fourth Turning is Here, which eloquently explores long-term (multi-decade) historical trends in markets. Today, we face a level of uncertainty, both abroad and domestically, that rivals anything seen over the last four decades.
War has historically been a feature of major geopolitical turning points, and tensions in the Middle East continue to escalate. The potential for Iran to develop nuclear capabilities remains a critical concern for Israel and its allies. The new administration may provide strategic support to Israel while seeking diplomatic cooperation from Saudi Arabia to manage oil production and stabilize global markets.
The investment implications of these geopolitical dynamics are profound. Over the coming year, we are likely to experience periods of heightened volatility across interest rates, equity markets, and even commodities like gold. While volatility may eventually ease, addressing the fiscal deficit will likely require decisive action from Congress. Given the current geopolitical landscape, I encourage investors to reassess their risk tolerance and investment horizon. For those with shorter timeframes or an aversion to volatility, reallocating into the strategies outlined in this outlook may provide more stability and resilience.
Five Themes for 2025
The coming year presents a mix of persistent challenges and emerging opportunities for investors. Each of these themes highlights pivotal trends that will shape the economic and investment landscape in 2025. Understanding these drivers will be critical to navigating the complexities of the market and positioning portfolios for success.
Below is a summary of our six investment themes for 2025.
THEME 1: Elevated Inflation and Interest Rates
Inflation remains well below its peak of over 9% in summer 2022 but persists stubbornly above pre-pandemic levels. This stickiness reflects a structural shift as consumers and businesses adjust to a higher cost baseline. Elevated service prices and supply chain disruptions have contributed to inflation’s resilience, despite moderating energy and goods prices.

Central banks worldwide are cautiously transitioning to a more accommodative stance, with gradual rate cuts anticipated in 2025 and 2026. However, long-term interest rates are expected to stabilize above the levels of the 2010s, which may impact consumer spending patterns (although it hasn’t yet) and increase borrowing costs for corporations.
For investors, this means remaining diligent and active when investing, especially in fixed income. As rates stabilize, we see increasing opportunity to invest in short duration, securitized debt, as well as private debt to lower middle market companies
THEME 2: Booming Energy and Infrastructure Investments
The global demand for energy is outpacing supply, creating significant opportunities for private sector investments. Infrastructure projects, including renewable energy, nuclear power, and AI-driven data centers, are at the forefront of this expansion. Yet, political and regulatory hurdles continue to delay progress in critical sectors like renewable energy.

Key growth areas include advanced data centers supporting AI technologies, energy storage solutions, and grid optimization initiatives. Infrastructure investments across these verticals are essential for supporting economic growth and addressing the world’s mounting energy needs. We are focused on making strategic investments in companies and funds capitalizing on these trends, as they represent durable growth opportunities in a rapidly transforming landscape.
THEME 3: Unstoppable Corporate Profits
Advancements in artificial intelligence, robotics, and automation are fundamentally reshaping industries, driving unprecedented gains in productivity and profitability. Companies that effectively integrate these innovations are poised to lead the global competitiveness race, translating technological leadership into robust bottom-line growth.

In our view S&P 500 growth companies remain well-positioned to capitalize on these themes through new product development and market expansion. As such, we think equity markets are on track for another strong year of performance, similar to the late-90s multi-year equity market rally. While valuation multiple expansion drove much of the index’s performance in 2023 and 2024, we expect earnings growth to take the reins in 2025. As elevated valuations begin to normalize, companies with strong earnings momentum and resilient business models will emerge as key winners. As such, we expect US Large-Cap outperformance to persist against both US market caps and international stocks.
THEME 4: Trump 2.0: Rolling the Dice on Fiscal and Trade Policy
The new administration’s fiscal and trade policies have introduced both opportunities and challenges for the U.S. economy. Proposed tariffs, deregulation, and labor market reforms are creating significant market uncertainties, with potential ripple effects on inflation and global supply chains.

Labor market policies, such as mass deportations, pose a unique dichotomy. While they could elevate wage inflation by reducing the labor supply, they might also curb overall consumption, creating disinflationary pressures. Moreover, the reintroduction of tariffs risks reigniting retaliatory trade measures, reminiscent of the Smoot-Hawley Tariff Act of 1930. The ultimate impact of these policies is uncertain, which is why investors must remain vigilant as these policies evolve, understanding their potential impact on markets and sectors. Ultimately, we believe the Trump Administration will be a tailwind to US markets, although there will be volatility along the way.
THEME 5: Diversify Debt Investments Away from Treasuries and Money Markets
Persistently high interest rates, coupled with looser fiscal policies, present a compelling environment for enhancing fixed-income returns. With rates expected to remain elevated, traditional safe-haven investments like Treasuries and money markets are losing their luster.
Opportunities exist in higher-spread fixed-income instruments, such as securitized credit, short-duration bonds, and middle-market private lending. These vehicles offer enhanced risk-adjusted returns, providing a critical income stream in today’s complex rate environment. Investors should adopt a diversified fixed-income strategy to capitalize on these opportunities while managing exposure to interest rate risks.
Conclusion
As 2025 unfolds, the economic and market environment offers both challenges and opportunities for investors. By focusing on key investment themes such as booming infrastructure, resilient corporate profits, and evolving fiscal policies, investors can align their strategies to navigate an ever-changing landscape. Defiant Capital Group remains dedicated to delivering the insights and expertise necessary to help clients thrive amidst these complexities.
Disclosures
This commentary reflects the personal opinions, viewpoints and analyses of the author providing such comments, and should not be regarded as a description of advisory services provided by Defiant Capital Group or performance returns of any Defiant Capital Group client. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Defiant Capital Group manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary.
This material is not intended to be a recommendation or investment advice, does not constitute a solicitation to buy, sell or hold a security or an investment strategy, and is not provided in a fiduciary capacity. The information provided does not take into account the specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made based on an investor’s objectives and circumstances and in consultation with his or her advisors.
The views and opinions expressed are for informational and educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions, legal and regulatory developments, additional risks and uncertainties and may not come to pass. This material may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections, forecasts, estimates of market returns, and proposed or expected portfolio composition. Any changes to assumptions that may have been made in preparing this material could have a material impact on the information presented herein by way of example. Past performance is no guarantee of future results. Investing involves risk; principal loss is possible.
All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.
A word on risk
All investments carry a certain degree of risk, including possible loss of principal, and there is no assurance that an investment will provide positive performance over any period of time. Equity investments are subject to market risk or the risk that stocks will decline in response to such factors as adverse company news or industry developments or a general economic decline. Debt or fixed income securities are subject to market risk, credit risk, interest rate risk, call risk, tax risk, political and economic risk, and income risk. As interest rates rise, bond prices fall. Non-U.S. investments involve risks such as currency fluctuation, political and economic instability, lack of liquidity and differing legal and accounting standards. These risks are magnified in emerging markets. This report should not be regarded by the recipients as a substitute for the exercise of their own judgment. It is important to review your investment objectives, risk tolerance and liquidity needs before choosing an investment style or manager.
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