How To Invest in the 2025 Soft Landing
• 3 min read

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Anticipating slower but steady economic growth in coming years, AMG foresees stock-market returns ebbing substantially in 2025 but remaining positive.
The past two years for equities have been exceptional, with annualized total returns over 25% for the S&P 500. However, for the next couple of years, investors could see the pace slowing to a mid-single-digit rate with greater volatility. It is an environment in which diversification will pay off.
Here are some considerations:
Domestic small- and mid-cap stocks could fare better than large caps for many reasons, including the path of the economy, expectations for the bond-yield curve and likely fiscal policies of deregulation. Large-cap equities should still be part of a portfolio, but investors should think about increasing small- and mid-caps. Additionally, look at an actively managed approach in these asset classes rather than index funds, considering the number of profitless companies that weigh on broad indexes.
Overseas stocks face considerable challenges in the near term but might reach a nadir relative to U.S. stocks later this year. Many policymakers abroad will need to reconsider their economic models in 2025 and work hard to reinvigorate growth. Out of this process, substantial opportunities will arise, but investors will need to be picky and should rely on proven active managers.
Fixed income investing is likely to be boring the next few years, which is perfect for individuals looking for stability and income. AMG expects low- to mid-single-digit returns in fixed income asset classes. In some cases, returns might be close to that of the S&P 500 but with less volatility. A good chunk of bond returns could be from coupon payments rather than price increases. When included in a portfolio, fixed income can provide ample income and is likely to significantly dampen overall volatility.
Illiquid and alternative investments show the most promise among AMG’s return forecasts. Notably, the combination of precious metals and energy have the potential to generate double-digit returns with relatively low correlation to U.S. equities—creating a counterbalancing effect in some adverse scenarios. Additionally, commercial real estate and venture capital are likely to generate similarly strong returns over a multi-year time frame.
Bottom Line – Investors shouldn’t expect the same returns from U.S. large-cap stocks that they got over the past two years. The S&P 500 has more upside, but broader diversification should pay off well in 2025 as the economy lands softly.
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This information is for general information use only. It is not tailored to any specific situation, is not intended to be investment, tax, financial, legal, or other advice and should not be relied on as such. AMG’s opinions are subject to change without notice, and this report may not be updated to reflect changes in opinion. Forecasts, estimates, and certain other information contained herein are based on proprietary research and should not be considered investment advice or a recommendation to buy, sell or hold any particular security, strategy, or investment product.
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