CPLB - 2025 Investment Directions: Navigating Market Trends
2025-01-09 07:00:00 ET
Summary
- We expect U.S. outperformance to continue amid solid economic growth, relatively easy financial conditions, and the potential for tax cuts and deregulatory policies.
- We continue to prefer large-cap, high quality U.S. equities and see tactical opportunities in financials. In fixed income, we prioritize income over price appreciation and prefer the front and belly of the yield curve to long duration exposures.
- Uncertainty associated with both trade and immigration policy could lead to slower growth, higher inflation – or both – over the course of 2025 and beyond. We look beyond traditional sources of ballast in an environment where long term bonds have been an unreliable source of diversification.
By Gargi Pal Chaudhuri, Kristy Akullian, CFA
Intro
We take a pro-risk stance heading into 2025 but acknowledge that consensus positioning can increase the likelihood of near-term pullbacks. Even so, record amounts of cash held in money market funds suggest that such technical dips are prone to be bought. Indeed, across our investment platforms, BlackRock’s portfolio managers have taken an overweight position in U.S. equities . We anchor our medium-term directional expectations on fundamental macroeconomic data and their flow through to corporate earnings.
Figure 1: Even in a banner year for equities, investors set aside record allocations to cash
Source: Goldman Sachs Global Investment Research. Groupings determined by Goldman Sachs Global Investment Research. As of 12/4/2024. Chart description: Bar chart depicting year-to-date ETF flows for non-U.S. equity, U.S. equity, bonds, and money markets.
