2025 Market Updates: Where We’ll Invest
In 2025, we remain steadfast in our commitment to long-term investment strategies while incorporating tactical adjustments that align with market valuations. We want to keep you informed as we make key updates to our investment approach for 2025. So, we’ve put together the following.
We believe these changes position our portfolios for a balanced approach to growth and risk management throughout the year. These actions reflect our response to evolving market conditions and our focus on managing risk while seeking to invest in undervalued opportunities.
- First-time Underweight in Equities in Over 15 Years: With equity market valuations at elevated levels, including multiples comparable to the peaks last seen in 1999, we have implemented our first underweight position in equities in over a decade and a half. This 3% adjustment is designed to mitigate risk and preserve capital in a potentially overextended market.
- Tilt Toward Value Over Growth: The growth sector continues to command historically high multiples. In contrast, value-oriented investments offer a more attractive risk-reward balance. We have increased our allocation to value equities, reflecting this more favorable positioning.
- Shift From Large Cap to Mid and Small Cap: While large-cap stocks have performed strongly, valuations in this segment are relatively high. Additionally, the potential for tariff risks pose challenges for global companies. To address this, we have reduced our exposure to large-cap stocks and increased allocations toward mid and small-cap equities, where valuations and growth prospects are more compelling.
- Slight Overweight to Cash and Real Assets: To enhance portfolio resilience, we slightly increased allocations to cash and real assets. This move provides liquidity to take advantage of future opportunities while offering diversification benefits in an uncertain market environment.
As always, we are dedicated to helping you achieve your long-term financial goals and will continue to monitor market conditions closely. If you have any questions on what to do as the year progresses, please don’t hesitate to reach out.
Term Definitions
Equity market valuations – Refers to the process of determining the overall value of the stock market or individual stocks. Valuations are often measured with metrics like price-to-earnings (P/E) ratios, price-to-sales (P/S) ratios, or market capitalization to assess whether stocks are overvalued, undervalued, or fairly valued.
Large-cap – Companies with a large market capitalization, typically $10 billion or more. Examples include blue-chip companies like Apple, Microsoft, and Coca-Cola.
Liquidity – Measures how easily an asset can be bought or sold without significantly affecting its price. Stocks with high liquidity are actively traded, meaning there are plenty of buyers and sellers.
Small-cap – Companies with a small market capitalization, typically between $300 million and $2 billion. Examples include small regional companies or startups.
Underweight – A term used in portfolio management to describe when an investor allocates less money to a stock or sector than its proportion in the benchmark index.
Value-style investing – Investing in stocks that appear undervalued relative to their intrinsic worth such as companies with low P/E ratios, or stocks that may have been overlooked or temporarily out of favor in the market. Warren Buffet is famous for this approach.
Content is for informational purposes only and should not be considered investment advice. Past performance is not indicative of future results. Investing involves risk, including the possible loss of a principal investment.
