2025 Global Asset Allocation Wall Street Alpha Capture Outlook

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Geopolitical tensions from Russia and Ukraine to Gaza and global trade relations continue to simmer. On the other hand, a rebound in growth could boost risk appetite especially if the Fed continues to ease. Economic growth in the U.S. remains resilient and the new Trump administration is focused on business-friendly, pro-growth policies coupled with the desire to cut interest rates, taxes, regulation and the overall size of the Federal government. Despite stretched valuations, U.S. markets remain best positioned to benefit from the AI secular trend.

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This distinctive approach provides the GA Selects team with four key structural advantages when it comes to portfolio construction. U.S. trade uncertainty, although less extreme now, remains a risk to trade-dependent markets. Many European and Asian currencies are also undervalued versus the U.S. dollar offering another potential opportunity. While the Bank of Canada has provided considerable easing, it’s likely we are near the end of the current easing cycle. Although negotiations continue, U.S. trade continues to be a major source of uncertainty. Canadian equities, driven by strong commodities returns, have outperformed other markets but continued outperformance is difficult to forecast.

• International investing involves risks, including risks related to foreign currency, limited liquidity, less government regulation and the possibility of substantial volatility due to adverse political, economic or other developments.
• Principal Global Investors FundsPrincipal Global Investors (Ireland) Limited is the issuer of the Funds.
• Without a significant slowdown in global GDP, defensive assets like government bonds and investment-grade credit are unlikely to lead.
• Asset allocation and diversification may not protect against market risk, loss of principal or volatility of returns.The BlackRock model portfolios are provided for illustrative and educational purposes only.
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In the U.S., the “Mag-7″2 tech stocks have both valuation and earnings support, while the remainder of the S&P 500 trade close to all-time peak valuations. Since we expect tech adoption to continue to drive rapid earnings growth in the sector, we tilt our U.S. exposure to tech and communication services. For all the market turmoil unleashed early in the quarter, the U.S. economy remains solid. Still, we judge the economy overall to be in late cycle, seeing few signs of major imbalances or excesses. The Company will not be registered under the United States Investment Company Act of 1940 as amended.

• Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice.
• The models are managed exclusively by BlackRock’s Global Allocation portfolio management team.
• Diversification does not guarantee investment returns and does not eliminate the risk of loss.
• We use these “Big Ideas” as a way of sense-checking our portfolio tilts and ensuring they are reflected in all of our portfolios.

International investing involves risks, including risks related to foreign currency, limited liquidity, less government regulation and the possibility of substantial volatility due to adverse political, economic or other developments. These risks often are heightened for investments in emerging/developing markets and in concentrations of single countries. Funds that concentrate investments in specific industries, sectors, markets or asset classes may underperform or be more volatile than other industries, sectors, markets or asset classes and the general securities market.Actively managed funds do not seek to replicate the performance of a specified index.

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Amid volatility around “Liberation Day”,1 global equities fell 11% and VIX jumped north of 50. But over the full quarter, global stocks are up more than 9%, VIX is down over 5 points, and U.S. policy rates remain on hold. The Internet is not a totally reliable and secure medium of communication. Principal Global Investors accepts no liability for the security or confidentiality of information transmitted in this way and any such transmission of information shall be at your own risk.

The Big Picture: Global asset allocation 2025 outlook

Our funds often possess holdings – and employ trading strategies – that are simply inaccessible through ETFs. Wolfe Research emphasizes the potential for increased volatility in 2025, given the uncertainty surrounding the new administration’s policies and their impact on the economy and markets. They also highlight the potential for higher inflation, driven by strong consumer spending and potential policy changes. Beyond China, other markets have been targeted, including Korea, Taiwan and Brazil. Relatively low valuations and rapid tech advancements provide offsetting opportunities as is the potential for more stimulus in China.

The Fed’s Summary of Economic Projections (SEP) and market pricing point to two rate cuts in 2025. But given ongoing labor market resilience and risks of inflation rising in the second half, we expect just a single cut in 2025 with an additional two in 2026 as inflation moderates. No SolicitationNothing contained in this website shall constitute an offer or solicitation, in relation to units in the Funds or generally, in any jurisdiction or in any circumstances in which such offer or solicitation is unlawful or not authorised. This material does not constitute any specific legal, tax or accounting advice.

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This positions U.S. policy settings on the tighter side of neutral, even as real rates temporarily decline with rising CPI. In contrast, the European Central Bank (ECB) and Bank of Japan (BoJ) are now in accommodative territory, with the Bank of England (BoE) moving in that direction. The entire content of this website is subject to copyright with all rights reserved.

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With that said, given the recent appreciation of bond prices combined with higher coupon income that can be earned now, our outlook remains positive for the next 12-to-18 months across global fixed income markets. The environment is supportive of risk-on assets like equities as inflation has peaked, global fiscal policy remains stimulative and global monetary policy continues to ease. While tariffs are inflationary, central banks are likely to look past resulting short-term price increases and continue to ease interest rate policy as the broader disinflationary trend continues. Global economic themes that are most likely to influence our views on portfolio asset allocation over the next 12-to-18 months. China delivered the strongest equity returns, while energy topped the commodity charts. REITs stood out as the best-performing global asset over the past month, with Japanese REITs leading across both short- and long-term timeframes.

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We have a modest overweight view on equities overall relative to fixed income. In summary, while the economic landscape presents near-term challenges, we believe the U.S. economy remains resilient. Away from the U.S. we see combined fiscal and monetary support as an upside risk, especially into 2026. Together this supports a modestly pro-risk stance, but also calls for greater emphasis on RV and end-manager return streams.

I confirm that I’m a UK institutional investor (Professional client) and I agree to and will comply with the Terms and Conditions of this site. I confirm that I’m a UK financial adviser (Professional client) and that I agree to and will comply with the Terms and Conditions of this site. In the U.S., tariffs will likely cause a temporary spike in inflation, peaking toward the end of 2025 with the core Consumer Price Index (CPI) hitting 3.8% 4Q/4Q at year-end. We expect inflationary pressure to subside over 2026, returning toward the Fed’s target by 4Q26. By selecting the “Accept” button below, and entering this website, you agree to these terms and confirm and represent that you are a “Professional Client”. Access to this website is only permitted for “Professional Clients” as defined in the Conduct of Business of the Dubai Financial Services Authority’s Rulebook.