Morgan Stanley's wealth management team predicts limited stock gains in 2025 due to persistent inflation fears and potential Federal Reserve policy limitations. Despite a recent rally fueled by easing inflation data, the firm advises investors to prioritize diversification across asset classes such as financials, industrials, healthcare, energy infrastructure, and midcap growth.
It will be harder for investors to come around stock gains this year, making a diversified portfolio that much more important, according to Morgan Stanley's wealth management team. Already in 2025, the major averages have been pressured by fears of sticky inflation and concern that the Federal Reserve will not be able to cut rates as much as anticipated. Those fears were somewhat assuaged this week on the back of lighter-than-expected U.S. inflation figures.
"On a risk-adjusted basis, therefore, we suggest broad diversification where 10% total potential returns in areas like IG and real assets are possible," she continued. "Also, we like hedge funds, non-US stocks, residential real estate and global infrastructure, MLPs, and private equity secondaries." This outlook comes as the S & P 500's gains of 24.2% in 2023 and 23.
STOCK MARKET DIVERSIFICATION INFLATION FEDERAL RESERVE INVESTMENT STRATEGY
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