Midyear Outlook 2025

Overview

GIVEN THE ECONOMIC distortions witnessed in recent months and the ongoing uncertainty around policy and geopolitics, it is a difficult time to have strong convictions.

However, some semblance of clarity is expected in the near future, and our base-case view is that the economy will begin to show more definitive adverse effects from trade policy with slower labor demand, weaker growth, and an uptick in inflation.

This challenging macro environment will create periods of volatility for the stock market, but we ultimately expect equities to finish the year moderately higher, as we believe neither the administration nor the Federal Reserve (Fed) is permanently committed to their current policy trajectory.

We think bonds will remain largely range-bound in the second half, influenced by the interplay of debt level concerns and burgeoning economic weakness, though we see greater potential for a downside surprise in yields given the economic risks.

Overall, we believe the environment ahead calls for balancing risk mitigation with proactive positioning for upside opportunities. Achieving this will require a stronger emphasis on diversification across asset classes and geographies, along with increased allocations to investments that do not move
in lockstep with traditional assets, such as alternatives.