2025 Mid-Year Outlook: Key takeaways

You’ve probably heard the word “uncertainty” more times than you care to count this year and for good reason: Markets are jumpy. Meaningfully higher tariffs, tax policy negotiations and rapid evolution of the artificial intelligence (AI) landscape are just a few of the dynamics in play. But here’s the thing: Uncertainty about the future isn’t anything new. What matters is how we plan for it and the questions we ask to stay grounded.

Our 2025 Mid-Year Outlook is all about becoming comfortably uncomfortable as the backdrop evolves. Below, we cover five key takeaways investors should consider this year.

Should investors cheer or fear Trump 2.0?

Markets, especially in the U.S., have taken a hit this year. Confidence among businesses, consumers and investors has dropped sharply as tariff announcements roll out in piecemeal (and often surprising) fashion. With the effective U.S. tariff rate likely to settle in the mid-teens, fear that trade policy will slow growth and squeeze consumer spending has sparked concerns about recession. But underneath the headlines, fundamentals are still holding up. Stronger-than-expected earnings from tech and potential bank deregulation could help push U.S. equities to new highs over the next year. Outside the U.S., fiscal stimulus in Europe as well as corporate reforms in Japan could support continued outperformance of international markets over the coming quarters.

Is your portfolio resilient to growing risks?

It’s tempting to think that portfolio resilience means hiding in cash. To us, what it actually means is holding a diverse collection of assets that behave differently from one another in different market backdrops, each with the potential to outperform cash over time. That way, when one part of the portfolio struggles, another can help cushion the drop or drive returns. As an example, to complement a globally diversified stock and bond portfolio, structured notes, for those who qualify, may be a valuable tool for generating income and can provide downside protection in potentially volatile market environments. Gold is another example, given it can play the role of a diversifier against geopolitical risks and U.S. dollar weakness.

Is this the downfall of the U.S. dollar?

The U.S. dollar has weakened against every major trading partner this year. So far, the decline seems to reflect a combination of April’s tariff rollouts, ongoing uncertainty about trade policy more broadly and concerns about the impact of coming Congressional legislation on the U.S. budget deficit. But are the current drivers of dollar downside posing serious threats to its role as the world’s reserve currency? We don’t think so. Its advantage is well-entrenched in the global financial system, accounting for roughly 60% of central bank foreign exchange reserves, 65% of international debt and nearly 85% of SWIFT trade finance settlements. That doesn’t mean that there isn’t potential for further near-term depreciation, however. It is a reason to consider holding a globally diversified investment portfolio, where allocations to international market segments can naturally offer exposure to other currencies.

Why isn’t anyone talking about AI anymore?

It feels like investors stopped talking about AI once trade policy uncertainty became the dominant focus, but it deserves attention now more than ever. Models like DeepSeek, released by a Chinese startup, show how rapidly performance is improving as costs are declining. Agentic AI, which can operate with a high level of autonomy and human-like intelligence, could very well define the next wave of software platforms. We’re still early in this AI story, and we are excited by the prospects of broader adoption, productivity gains and user experience enhancements.

What’s the deal with dealmaking?

After the 2024 election, many expected a strong bounce back in capital markets activity like initial public offerings (IPOs) and mergers and acquisitions (M&A). That hasn’t happened yet. Elevated interest rates and policy uncertainty have slowed activity, especially in public markets. However, private equity is starting to regain balance and secondary sales are rising. Secondaries could provide diversification across private equity vintage years and managers. A further tailwind could come in the form of large institutional investors looking to raise liquidity from their existing private equity portfolios.

Closing thoughts: Comfortably uncomfortable

As we strive to help investors find opportunity in uncertainty, each element of our outlook leads to a consistent conclusion: The value of diversification. That considered, we are keen to note that diversification is an outcome of effective goal-aligned approach to your finances – not the objective. Thorough consideration of factors like your starting point, time horizon, risk-tolerance and expected contributions and distributions help determine which risks you may need or be willing to take in different parts of your portfolio. Keep the intentions for your money centered as you build and evolve your wealth plan.

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