The following post is courtesy of Diane Harrison who is principal and owner of Panegyric Marketing, a strategic marketing communications firm founded in 2002 specializing in alternative assets.
The year has started off with such dizzying speed, it’s hard to know what to focus on first. Each day there are multiple news stories impacting national and international issues such that an investor or money manager hardly knows which way to turn. What’s coming next? Which of the new initiatives will grow to have major impact? How will the rest of the world receive the growing influence the US wields in 2025?
The investment community is essentially a crucible for interpreting how these issues will affect the financial markets short to long term. Investors look to our markets to provide indications of how money should be performing in the various asset classes. Typically there are clearer signals as to how this is working. But 2025 is not going to be a typical year. It’s safe to say that most of the financial world will spend this year playing catch up and reacting to a unique and dynamic environment.
Some positives/negatives to look for as we strive to make sense of a warp-speed climate:
1. The US stock market rose over 50% in the past 2 years, and people with holdings in the market are feeling pretty good about their accounts at present. This is mitigated by persistent elevated levels of consumer prices and interest rates, which continue to depress spending and affordability for many individuals. Food, housing, utilities, and gas cost more than we want to see, and no immediate remedy for that is to be seen.
2. The US labor market is fairly healthy, with jobs available for those who want to work. However, the labor market is still seeing effects from the Covid shutdowns 5 years ago, with a workforce either reluctant or unqualified to fill the jobs currently needing filling. More people will have to reevaluate the work they can do and seek paying jobs where they’re offered versus waiting for an idealized job to present itself. The widespread reductions in force through the governmental agencies in response to the audit findings of DOGE will also show in labor statistics.
3. What will happen on the global front in terms of war/peace? Unfortunately, war is a major driver of the economy and will have an outsize impact on the future direction of our outlook and planning for work, retirement savings, education/training, and more. There are multiple hot spots geopolitically that could form into a war scenario this year. With the US demanding that European nations take greater initiative in defending their own borders and participating in NATO alliance stances, tensions are rising on the Continent and in the Middle East.
So what is an investor to make of these issues and more? Without clear direction on what situations will improve versus deteriorate over the coming months, how should investors position themselves to ride through the uncertainty?
One response might be to begin by taking an internal audit. Are your financial needs being met? Are there any anticipated funding spends on the horizon- education? repayments? a life event such as birth, marriage, medical bill? A good starting point is to take stock and trim unnecessary expenses, which is an action outside of the external pressures, and one each investor can control to some extent.
Second, this is a good opportunity to educate yourself on what you own, and perhaps what you lack, to maintain a diverse portfolio with appropriate risk exposure. With the stock market’s strong performance the past 2 years, have you become overweighted in stock versus other holdings? Are you confident you’ve evaluated assets or strategies that you currently don’t own but might consider adding? There’s no risk in learning about a range of investments, and the added knowledge might positively impact your decisions to make changes.
If you are a money manager, this might be an ideal climate to invest in your own educational efforts as outreach. Have you described your strategy approach with plain language? Do you talk about how it works in a range of market scenarios, including today’s environment? Have you illustrated its performance with some investor case studies? All of these tactics can work to improve the chances of both keeping clients and winning over new prospects.
2025 may represent wildly divergent interests to us all, but increasing your proactive investment stance can help alleviate some of the reactionary whiplash we may feel this year.
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