The investment outlook for 2025 is likely to diverge significantly from actual market trends in 2024. There is a high likelihood that asset class laggards during 2024 will be winners in 2025, and vice versa. Overall rates of return will fall far short of the sizable gains posted in 2024. Balanced account portfolios should become increasingly defensive during the course of this year. An underweight allocation in both common stocks and bonds is recommended, with an above-average weighting in risk-free cash yielding close to 5%.
Investors should expect minimal returns from the bond market in 2025, as rising yields generate capital losses. Fixed-income portfolios should emphasize short-duration bonds with equity portfolios emphasizing international and value stocks, both obvious laggards in 2023 and 2024. Balanced account portfolios should reduce exposure to the technology sector to levels well below-average benchmark weightings. Aggressive unconventional policy actions by the Trump administration could trigger a larger drawdown in equity prices as occurred in the second year (2018) of the first Trump presidency... READ MORE
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