Portfolio Insights

As U.S. growth is cooling, but not collapsing, we have trimmed overall risk in our portfolios. We are broadly neutral to modestly overweight equity; we overweight credit with reasonable conviction and mildly overweight duration.

We see Sub-Trend Growth as becoming more likely at 60%, and have lowered the probability of Above-Trend Growth to 10%. We raised the probability of a Recession to 20% while Crisis remains at 10%.

Geopolitical risk is elevated but far from extreme. Still, political polarization has intensified and creates a more challenging environment. We favor bonds to protect portfolios from growth shocks and real assets to protect from inflationary risks.

2025 looks like a good year for profits. Many of our investors favor adding to defensive and higher quality names while remaining cautious about AI stock valuations.

U.S. equity factors led the market lower in the fourth quarter of 2024, the first decline, in aggregate, since early 2023 as the market was challenged by stock investors’ preference for expensive, low quality stocks. Macro factors performed well.

Every December, we publish our predictions for the year ahead. We believe these predictions have at least a 1-in-3 probability of materializing – making them realistic, while not necessarily being our base case expectations. We also ensure our predictions are not currently priced into the markets – making them surprises relative to investor positioning.

Our quarterly EMD strategy report assesses the latest economic developments in emerging markets and sets out our base case scenario for the asset class.