Trever T Christian
Trever T. Christian, CRPS®, AIF®, PPC
July 29, 2025

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Navigating Economic Shifts: 2025 Mid-Year Investment Outlook

As we reflect on the first half of 2025, it’s clear we’ve been navigating through significant economic policy shifts and heightened market volatility. Early in the year, investor confidence faced substantial tests, underscored by sharp market reactions in April following sweeping legislative changes and ongoing trade policy uncertainties.

Fragility and Durability: Our Guiding Themes

Our investment positioning entering 2025 was guided by the key themes of Fragility, Durability, and The Age of Alpha. These themes anticipated elevated market valuations, concentrated equity indexes, and persistent inflationary risks. The reality of the year thus far has only reinforced the importance of these principles.

The sharp volatility spike in April, triggered by tariff announcements and subsequent reprieves, highlighted the market’s fragility. However, our strategic emphasis on durability has proven beneficial. Allocations in fixed income to mitigate rate volatility, increased international equity exposure to reduce U.S.-centric risks, and broadened exposure to real assets have all provided stability amid the turbulence.

Economic Overview: Mixed Signals

Economically, we find ourselves in a period best described as the “messy middle.” Soft economic data—including consumer confidence and small business optimism—have weakened amid concerns over inflation, elevated interest rates, and geopolitical tensions. Conversely, hard data, including GDP growth and employment figures, continue to show resilience.

The recently passed “One Big Beautiful Bill” (OBBB) brings both opportunities and challenges. It prevents a significant tax hike, provides targeted consumer aid, and incentivizes domestic manufacturing. However, it also exacerbates the U.S. deficit, potentially pressuring the dollar and contributing to market volatility. Global liquidity conditions, supported by ongoing deficit spending and stable money supply growth, continue to underpin markets, potentially prolonging this economic expansion and reinforcing selective investment opportunities.

Market Positioning: Stability Amid Uncertainty

Given these factors, our mid-year stance remains intentionally unchanged. We continue to advocate for diversified portfolios, strategically balancing risk and opportunity:

  • Fixed Income: We find fixed income broadly attractive, despite historically tight credit spreads. Elevated base rates offer compelling yields, with core bonds presenting an optimal balance of risk and reward.
  • Equities: Broadly speaking, U.S. equity markets appear fully priced with valuations above historical averages; however, certain sectors, particularly Technology and innovation-driven industries, may justify higher valuations given their robust earnings growth, strong fundamentals, and increasing global influence. It’s important to clarify that while we see elevated valuations in broad U.S. markets, we do not suggest that markets have necessarily peaked. Continued global liquidity, driven in part by deficit spending and accommodative monetary policy reflected in stable or expanding M2 money supply, could sustain market momentum. Still, investors should remain mindful that higher valuations generally imply elevated risks, underscoring the importance of selective positioning. Our response has been to enhance durability by maintaining meaningful international equity exposure, where valuations are favorable and markets benefit from weaker dollar dynamics and targeted stimulus. Simultaneously, we continue to pursue selective U.S. equity opportunities, particularly in Technology and innovation sectors, which exhibit sustained earnings strength and long-term growth potential.
  • Alternatives: Real assets, hedge funds, and private equity remain attractive. Real assets provide inflation protection, hedge funds capitalize on active management in volatile times, and private equity—particularly lower middle-market strategies—offers compelling long-term opportunities.

Investment Principles to Guide Your Path Forward

In periods of uncertainty, disciplined investment principles become even more critical:

  1. Diversify with Intent: Thoughtful diversification aligned with clear views on opportunity and risk remains crucial.
  2. Time Is Your Ally: Staying focused on the long-term allows the power of compounding to mitigate short-term noise.
  3. Price Matters: Vigilance on valuations ensures prudent investments and avoids potential pitfalls.
  4. Compensated for Calm: Maintaining discipline when fear drives market sentiment is a powerful advantage.

Looking Ahead

As we progress through 2025, markets will likely continue to test our resolve and strategies. Remaining true to our foundational principles and strategic allocations positions us well to manage through ongoing volatility and capitalize on emerging opportunities.

As always, our team is here to guide you through these dynamic times. Should you have any questions or wish to discuss your portfolio in greater detail, please don’t hesitate to reach out.