2025 Forecast:
Year in Review.
Evaluating our original 2025 predictions against reality. An honest assessment of what we got right, what we missed, and the lessons for the year ahead.
At the beginning of 2025, we outlined five key macro themes we expected to drive markets. Eight months later, the data paints a nuanced picture of resilience and divergence.
Prediction Scorecard
Soft Landing Achieved
Prediction: US avoids recession despite tight monetary policy.
Reality: GDP growth stabilized at 2.1% with unemployment below 4.5%.
Quality Factor Leadership
Prediction: High free-cash-flow companies would lead returns.
Reality: The "Quality" factor outperformed "Growth" by 450bps YTD.
Fed Rate Path
Prediction: 75bps of cuts by Q3.
Reality: Only 25bps cut materialized due to sticky services inflation.
China Recovery
Prediction: Cyclical rebound in Chinese equities.
Reality: Structural property issues continued to weigh on sentiment; market remained flat.
Lessons Learned
The key lesson of 2025 was humility about timing. While our directional calls on the US economy were correct, the persistence of inflation delayed the monetary pivot we anticipated. This reinforces our philosophy of constructing portfolios that are robust to multiple rate outcomes, rather than betting the house on a single Fed trajectory.