Executive Summary 2025: Finding opportunity amid uncertainty

Looking into the new year, the crystal ball is cloudy. However, there are several standout themes we’ll be watching closely, such as interest rates, fiscal policy, and inflation. A major factor in the development of all these themes will be the beginning of the second Trump administration. 

The breadth of change that Trump has proposed — particularly as it relates to tariffs, immigration reform, and tax cuts — suggests that 2025 could be a volatile year. These changes could have a significant impact on inflation, and investors may have to exercise patience in order to find relative winners in the US and global markets.

Divergence and dispersion drive opportunities…

As we continue through this era of structurally higher inflation and greater volatility, dispersion across global markets is likely to increase. This suggests there may be renewed value in diversification, a trend already playing out in global equity markets.

On the fixed income side, as the growth/inflation trade-off acquires increasingly local dimensions, rates markets may become more sensitive to national, rather than global, cycles — something investors haven’t yet priced in. Idiosyncratic dispersion could also create attractive entry points to add securitized credit exposure.

This environment may create opportunities outside of traditional asset classes, too. Historically, hedge fund performance has been strong in periods of higher security-level dispersion, macro volatility, and interest rates.

…and AI enhances optimism

AI has already had a profound impact on markets, but we believe these are early days for this trend. Applications will likely broaden over time as AI improves and expands across industries, creating a challenging but potentially rewarding opportunity in the venture capital space, as investors parse out the sectors and companies most likely to survive and thrive over the long term. 

There is also likely to be increased demand for different capital solutions to support the ongoing breakthroughs in AI, with implications for public and private markets, as well as traditional and alternative asset classes. Private debt, for example, may play an integral role in growing AI not only by funding companies pioneering this new technology, but also by providing capital to develop infrastructure for data centers, expand the electric grid, build new energy capacity, and more.

Putting things in perspective in 2025

While the new year is shaping up to be potentially volatile and uncertain, opportunities may present themselves to investors who are able to maintain perspective. We encourage investors to consider different points of view to build a fuller picture of the investment landscape and the broader world. And for our part, we’re committed to maintaining our independent approach and leaning into our distinctive strengths as an active manager to seek to meet and exceed evolving client expectations.