Five Themes for ’25 and their SAA Implications for US Equities, TIPS and Crypto

What You Need to Know

This note outlines five investment themes for 2025. These are not necessarily trades for the coming year, but rather issues that asset owners need to think about—even if some implications are longer term. They are topics which we believe necessitate a change in investors’ expectations and in their asset allocations.

The key allocation conclusions of this note are as follows. We maintain our overweight recommendation on global equities, and within that we have shifted to be explicitly overweight the US. We think exposure to private assets has more room to increase (although not private equity). We are explicitly overweight Treasury Inflation Protected Securities (TIPS) versus a strategic underweight on duration via nominal government bonds. We were already positive on gold, and now add a strategic position in crypto in our strategic asset allocation.

In our view, expectations of medium-to-long term inflation need to rise, and we suspect that questions of fiscal sustainability are likely to be a constant refrain in upcoming meetings. The broad investor tilt toward real assets has further to go. Tactically, we think that equities will deliver positive returns over the coming year.

The strategic backdrop that we have laid out in previous research is one of higher equilibrium inflation and lower real growth rates, requiring a reallocation by investors into a higher weight for real assets. The underlying motivation for this view is that the large structural forces that drove a decline in yields in the decades prior to the pandemic have run their course and in some cases are now acting in reverse. These forces are demographic change, globalization turning into de-globalization, the energy transition and climate. 

How does the new US administration under Trump affect this? We are writing this before we have full clarity on the policy agenda, but in the near-term we see expansionary and regulating-cutting policies as pro-growth. However, over the medium to long term we think a Trump administration accelerates a shift to an investment regime of higher equilibrium inflation and ongoing concern about fiscal sustainability. 

The key conclusions of this note are: We maintain our overweight recommendation on global equities, within that we have shifted to be explicitly overweight the US. We think exposure to private assets has further to increase (although not private equity). We are explicitly overweight TIPS versus a strategic underweight on duration via nominal government bonds. We were already positive on gold and now add a strategic position in crypto in our SAA.

Expectations of medium-to-long term inflation need to rise, and we suspect that questions of fiscal sustainability are likely to be a constant refrain in upcoming meetings. The investor tilt to real assets (private and via public equity) has further to go.

Tactically we think that equities will deliver positive returns over the year.