Outlook 2025 — Keep On Truckin'
Watch Sharmin Mossavar-Rahmani, head of ISG and chief investment officer of Goldman Sachs Wealth Management, talk through the key themes from this year's outlook.
Illustrating US Preeminence | The Gap Widens
The cover art for our Outlook depicts how the gap between the US and other developed and emerging market countries continues to widen across key economic and financial market metrics, and no major country will catch up for the foreseeable future, if ever.
Adjusting Strategic Asset Allocation
ISG’s maximum overweight to US assets relative to the MSCI ACWI was 23 percentage points (ppts) in 2009. As US equities outperformed non-US equities, the overweight narrowed to seven ppts by year-end 2023. ISG has made some minor adjustments to the model portfolios which implicitly increases the overweight to US equities (from 7 to 12 ppts) through an allocation to private assets funded out of non-US equities. It is important to note, ISG does not recommend a zero allocation to non-US equities.
Assessing Opportunities in Non-US Equities, Gold, and Bitcoin
ISG continues to recommend clients stay invested in US equities at their strategic asset allocation target, rather than tactically allocating away from US equities toward other assets, namely: non-US equities, bonds or cash, gold and bitcoin.
Risks to the Outlook
Investors face significant geopolitical risks that could meaningfully impact global growth and financial markets in 2025.
Questions From Our Clients
After such a long run of US equity outperformance, clients are asking questions about our strategic and tactical asset allocation views.
- Allocate all public equity exposure exclusively to the US?No. While ISG recommends an overweight to US equities, they do not recommend a zero allocation to non-US equities. ISG does not expect US equities to outperform by the same magnitude we have seen over the last 15 years, and many world-class companies are located outside the US and are attractively valued.
- Underweight US equities in favor of non-US equities?No. While non-US market equities are trading at a discount to US equities, ISG believes the lower valuations are justified based on slower economic trend growth, lower earnings per share growth, weaker demographics, and more geopolitical vulnerabilities in non-US developed economies.
- Tactically underweight US equities with an allocation to cash or bonds?No. ISG expects US equities to outperform intermediate-duration US bonds and cash in 2025.
- Allocate a portion of the portfolio to gold, bitcoin, or both?No. ISG does not believe that either gold or bitcoin have a strategic role in clients' portfolios. Gold does not generate income, and — contrary to popular belief — it is not an inflation hedge. Bitcoin does not meet ISG's criteria of an investable asset.
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