Peter McLean, head of multi-asset portfolio solutions at Stonehage Fleming, advisor to families and wealth creators, has just published his annual investment outlook for 2025 and multi-asset investment strategy.

The investment outlook for 2025 is set against a backdrop of robust economic conditions and heightened US optimism, according to Peter McLean at Jersey-headquartered Stonehage Fleming.

“Global growth remains healthy, inflation has largely normalized, and interest rates are falling. Corporate earnings growth has been impressive, led by US mega-cap technology once again,” McLean said in a note. “Broad risk assets have responded accordingly, with global equities, particularly the US market, delivering a second year of double-digit returns, while corporate credit trades at historically tight spreads to Treasury bonds,” he added. “The US administration intends to reduce taxes and regulation for businesses, creating a ‘sugar high’ for consumers, businesses and investors at the end of 2024.” 

“In stark contrast to popular opinion 12 to 18 months ago, the investment community is virtually united in its constructive 2025 outlook for the US,” McLean said. He highlighted his continued bias towards US equity markets for long term growth.

“In addition, the structural challenges in Europe and China are indisputable, and meaningful reform, given the political and social constraints, remains scarce,” he continued. Higher US tariffs are expected to be more painful for Europe and China, where pessimism is pervasive.

“There is little doubt that Europe is facing multiple crises, with fierce competition from Chinese industry, protectionism from the US, and domestic political pressures. These crises underpin our caution toward European assets, yet a catalyst for widely held pessimism to moderate is under close watch,” McLean said.

China
McLean highlighted how the Chinese stock market surged, following a surprise package of fiscal and monetary policies at the end of September last year. But the Chinese property market remains a heavy burden for the economy, in particular. “Whilst recent stimulus measures appear effective in stabilizing the financial and economic system, game-changing policies remain lacking. Fiscal support for the property market has been delivered through reduced mortgage rates and deposit requirements, but it does not address the overhang of unsold inventory,” he continued.

“The contrarian argument is that China is a resourceful nation and the Chinese authorities will do whatever it takes to restore their economy as the powerhouse of Asia,” he said. “With valuations, sentiment and expectations historically low relative to the US, emerging market equities could be set for an inflection point after about 15 years of underperformance,” he continued. “The time may come for a bold, contrarian approach which rewards such investors, but a clear structural catalyst will be needed to sustain market leadership. With no such catalyst, against a backdrop of rising protectionist and geopolitical threats, a cautious yet open-minded approach is prudent.” 

Multi-asset investment strategy
With US growth optimism surging, global policy uncertainty high and the potential for volatility underappreciated, McLean’s equity allocations remain close to a neutral setting overall.

His equity strategy blends investments in mega-caps, exhibiting strong earnings and price momentum, namely US AI-centric technology, with allocations to global quality businesses and differentiating smaller companies.

“The absence of clear recessionary flags, or resurgent inflation, implies that robust real earnings growth can continue to support US equities over the long term,” he said.

Other wealth managers, such as Standard Chartered, Northern Trust Asset Management, UBS Global Wealth Management, Pictet Asset Management and Goldman Sachs Asset Management also favor US equities in 2025. Indosuez Wealth Management’s CIO, Alexandre Drabowicz also said this week that US equity markets remain strong in 2025, driven by AI-focused US tech stocks. See more commentary here and here.

McLean highlighted how opportunities for enhanced returns can be accessed through strategies which look further than yesterday’s US tech winners: “The small cap segment of the equity market is one such example.” Following the US elections, and the expected deregulation and risks of tariffs, he sees continued acceleration in US reshoring policy, benefitting the industrial and technology sectors. “There are also opportunities in the small cap sector to capture artificial intelligence exposure through lesser-known companies benefiting from the AI infrastructure buildout,” he added. Following continued investment in AI capabilities, he anticipates tailwinds for small cap technology companies focused on semiconductors, network equipment, cyber security software and data center suppliers.

“The combination of real earnings growth, US reshoring and the AI infrastructure buildout supports a favorable outlook for the small cap sector overall. An actively managed approach is preferred, allocating to select stocks that capture superior earnings growth and strong fundamentals,” McLean said. As he expects small cap earnings to improve, McLean retains a strong conviction in this segment.

McLean also highlighted how diversifying asset classes, such as government bonds, physical gold, long/short active managers and insurance-linked ‘catastrophe bonds’ aim to provide uncorrelated positive returns in aggregate, creating a robust portfolio composition in the event of market volatility. His multi-asset strategy continues to hold core government bonds for both diversification and long-term total return generation.

Jersey-headquartered Stonehage Fleming, which has offices in London, Switzerland, South Africa, the US and Canada, manages assets worth more than £18 billion ($22 billion).