The year 2025 promises to be an intriguing one for investors, with a generally favorable economic backdrop but significant challenges ahead. Johanna Kyrklund, Group Chief Investment Officer at Schroders, shares her insights on global dynamics, emphasizing the importance of diversification to build resilient portfolios.
Economic and political context for 2025
Donald Trump’s re-election has reignited debates about his economic and trade policies. However, according to Kyrklund, Trump is more a symptom than a cause of ongoing trends: a multipolar world, more expansive fiscal policies, and higher interest rates.
The global economy is showing encouraging signs: inflation is declining, and interest rates are falling in both the US and Europe. This combination provides fertile ground for a potential “soft landing” and economic growth recovery throughout the year.
Opportunities in equity markets
In the US, the stock market is undergoing structural changes. While the S&P500 seems overvalued, opportunities arise outside major tech companies. Deregulation and corporate tax cuts promoted by Trump could further expand the stock market, creating new avenues for growth.
Outside the US, tariffs announced during the electoral campaign might create uncertainty but could also stimulate new global trade dynamics. Protectionist policies may drive companies to relocate, impacting both the US economy and its trade partners.
Bonds make a comeback
Bonds are once again an attractive source of fixed income, amid fiscal and monetary divergences across regions. According to Kyrklund, including bonds in portfolios remains crucial, supported by solid corporate balance sheets and opportunities in credit markets.
Additionally, gold continues to serve as an essential diversification tool, providing a hedge against recession risks and geopolitical complexities.
Resilience through diversification
The investment world is facing unprecedented disruption, ranging from geopolitical conflicts to economic uncertainties. To address these risks, Kyrklund advises diversification through less exposed assets, such as real estate, infrastructure, and insurance-linked securities.
Commodities, despite concerns about global growth, play a pivotal role in building resilient portfolios, while private markets offer long-term opportunities.
The outlook for 2025 remains promising, but challenges lie ahead. A diversified approach will be crucial to seize opportunities and mitigate risks. What are your thoughts on this analysis? Share your opinion in the comment form below.
