2025: The Year Ahead

2025-01-24 07:45:00 ET

Summary

• It is never easy to predict what is going to happen in the next twelve months, and very rarely do the best efforts of economists, sociologists and market pundits of all stripes get it all right.
• It is especially hard this year because the world is in a profound state of transition.
• 2025 may also be a year in which US stocks with a higher component of domestic sales and less exposure to potential risks in places like China could outperform their multinational counterparts.

The World In Transition

It is never easy to predict what is going to happen in the next twelve months, and very rarely do the best efforts of economists, sociologists and market pundits of all stripes get it all right (you can generally toss away all those specific numbers the big banks and securities firms come up with about where the S&P 500 or Nikkei 225 will become New Year's Eve 2025, and they will all be revised multiple times anyway between now and then).

It is especially hard this year because the world is in a profound state of transition. What we have more or less accepted as the norms of what is still quaintly called the "postwar order" - the war in question having ended eighty years ago in 1945 - no longer seem to be the permanent backdrop for the shorter-term cycles of economic, social and political ebbs and flows. Nor is there anything like a clear-cut "new order" in anyone's line of sight; what we are going through instead is a transition on many levels.

To be perfectly honest, this transition may or may not have a meaningful impact on the progress of financial markets in 2025. Markets are very good at ignoring whatever they cannot price directly into a numerical valuation model, and they are entirely amoral as to fuzzy, qualitative notions like the rule of law or the rights of out-of-favor minority populations. But we know that the uncertainty of this transitional period is something of concern to many of our clients. We are going to address it up front, in this first section of our outlook. Then, as usual, we will go through our specific investment thesis for the economy and financial markets in the second section, explaining the thinking behind our portfolio allocation decisions and noting the many variables that will probably require more rethinking as the year goes on....

Read the full article on Seeking Alpha

For further details see: