Our 2025 year-ahead market commentary looks at ways to prepare your portfolio for the unpredictable by exploring alternatives and other ways to enhance diversification.

The future is never completely clear, but signals look particularly mixed as we enter the new year. Economic growth, inflation, monetary policy, politics, and global affairs all seem to be at a crossroads, making it hard to have conviction in specific market outcomes. Negative developments in any of these spheres could unsettle the markets, while improvements could spur rallies. Events in one area could affect others — for example, expansion of war in the Middle East could have implications for fuel costs, politics, inflation, interest rates, and economic growth.

Such uncertainty can be unsettling, but it is not necessarily bad for investors. In fact, uncertainty is at the heart of investing. It’s the reason stocks offer more growth potential than cash: investors receive greater potential returns in exchange for taking risk.

Diversification makes it possible to accept and manage that risk in pursuit of long-term investment goals. Diversification is always important, but we think it is especially valuable now. All the potential inflection points in the world make the range of potential investment outcomes unusually wide. To navigate this terrain, investors need thoughtfully constructed portfolios that maintain exposure to growth while helping prepare for downside risk.

“Diversification is always important, but we think it is especially valuable now.”

In this issue we cover:

  • Forward focus
  • Investment recommendations
  • Partnership contributor: Nuveen
  • Investment outlook
  • Partnership contributor: RCP Advisors
  • Macroeconomic outlook
  • Appendix: investment framework
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