After two months of 2025, you may still be unsure about where to put your money this year
We asked the professionals where they believe investors ought to put their money.
Since 2025 has gotten off to a rough start, it seems more difficult than ever to decide where to put your money.
Many investors will be planning their 2025 stock and fund investments at the beginning of the year in order to help them navigate the challenging but potentially lucrative global market environment.
It might be wise to think about where to invest the remaining portion of your annual ISA allowance now that the tax year is almost over.
Markets have been volatile in the first two months of the year, but inflation and worldwide instability are still major worries.
Keep tabs on every market with TradingView "From an economic perspective, the environment is still quite benign," Johanna Kyrklund, Schroders' group chief investment officer, stated at the end of last year during a 2025 crystal ball webinar.
"Several central banks have begun to lower interest rates as inflation has increased, which is really beneficial.
Because of the recent difficulties in the UK stock market, some analysts think that the FTSE 250 stocks are now a desirable source of value.
This might be a major source of diversification away from US megacaps, as UK interest rates are hopefully now starting to decline.
But commodities, particularly gold, and bonds continue to be crucial parts of a well-rounded portfolio.
The risk and reward of the macroenvironment.
Schroders predicts that by 2025, the US economy will be growing again. Kyrklund says, "We weren't anticipating a hard landing."
The labor market's resilience, encouraging savings data, and the belief that fiscal spending is unlikely to make significant cuts are the main drivers of this.
"This confluence of declining rates and growth sustaining what is commonly referred to as a soft landing is extremely benign for markets.
But there are risk factors to take into account.
Trump's tariff policy has caused market jitters and may contribute to global inflation.
Although Schroders' baseline model shows that markets are doing well, they contend that higher global tariffs could have a negative effect on international trade and reduce US consumer spending.
U. A. On February 25, 2025, in the White House Oval Office in Washington, DC, President Donald Trump signs an executive order.
How much of an effect might Trump's tariffs have on this year's investment destinations?
(Photo courtesy of Alex Wong/Getty Images) "In general, a situation in which international trade is declining is one in which the pie is getting smaller," Kyrklund says.
Additionally, the bond vigilantes might oppose additional US fiscal expenditures.
The investment director at Fidelity International, Tom Stevenson, tells BFIA that "investors face a complex landscape" in 2025.
The markets are expected to be impacted by regional divergence, moderating inflation, and changes in US policy.
It is more difficult to forecast the global picture in many ways. Senior economist Shaan Raithatha of Vanguard tells BFIA, "Economies outside the US have struggled with stagnation and weak productivity."
"Global trade slowdowns pose a threat to Europe, while China requires more assertive policies to address structural problems.
However, Kate Morrisey, Evelyn Partners' head of asset allocation, believes that this year will see a return to global growth.
"Global growth may accelerate over the next 12 months if policymakers in the West and the East ease monetary policy," she says.
How persistent inflation continues to be and how this affects interest rates will have a significant impact on the country's economy, especially the UK.
Although inflation had appeared to be declining, the most recent data showed a startling increase to 3% in January.
Increased inflation may result from this. A "slightly more inflationary environment through 2025" is what Investment Association director of market insight Miranda Seath anticipates.
Markets therefore anticipate that the Bank of England (BoE) will "reduce the pace and the scale of interest rate cuts," Seath tells BFIA.
Regarding the government's plan to bring the UK back to GDP growth, this complicates matters in the short term. According to Seath, it may take longer than anticipated, which would have a detrimental effect on the short-term outlook for the UK equity market.
Diversification is crucial, according to every expert we've spoken to.
In summary, although there are grounds for optimism regarding 2025, this optimism is tinged with uncertainty for a number of reasons, and a diversified portfolio is the only way to protect against this uncertainty.
According to Kyrklund, "it is crucial to diversify investments that increase the resilience of your portfolio."
Does the SandP 500 represent an overvaluation of US stocks?
"There are a number of scenarios that could swiftly shift markets in a different direction, even though it is simple to construct a narrative in support of US stocks," Dan Coatsworth, an investment analyst at AJ Bell, tells BFIA.
Despite the system-shock caused by DeepSeek and the potentially inflationary effects of his tariff policies, US equity markets have held up well so far under Donald Trump.
Morrisey states, "It is well known that Trump views the US stock market as one of the most important barometers of economic performance and, as such, he will look to implement supportive policies." This might entail cutting back on regulations throughout the economy and lowering corporate taxes.
According to Morrisey, this "could facilitate greater innovation and efficiency with a resulting boost in productivity".
"Markets have had a very strong year," Kyrklund stated. "The question is, can equity prices, in particular, continue to rise in 2025".
Although Kyrklund thinks that stocks will remain "the main source of returns" in 2025, he acknowledges that there are challenges, particularly given the S&P 500's current stretched valuation.
"A lot of good news has been priced in," she says, so we need to exercise a little caution there. According to Raithatha, "a cautious approach towards US equities due to elevated valuations" is another recommendation.
Potential may exist in smaller US stocks. Stevenson asserts that tax breaks, tariffs, and deregulation should benefit smaller, domestically oriented US businesses.
As a result of these stocks' poor performance over the last two years relative to the tech giants, valuations are less stretched.
Are UK stocks cheap in the global equity market?
However, it is possible that the US megacaps that have dominated the equity markets for the past two years will eventually lose ground.
"I would argue that the valuations do look more attractive if you look internationally and move away from the megacaps in the US," Kyrklund says.
According to Raithatha, emerging market stocks, non-US developed markets, and UK stocks offer the best potential returns.
However, China's challengessuch as growing trade tensions and a lack of fiscal stimuluscould hurt emerging markets.
Because it is "cheap, offers attractive dividends, and contains lots of companies that might be in demand if the US market disappoints," Coatsworth points to the UK stock market.
Likewise, Seath emphasizes that UK stocks and shares are "cheaply valued" in spite of her worries about the country's inflationary effects.
In addition, Britain has a more stable political climate than the other major European economies, which may attract investors.
Investors may want to look at Japanese stocks in addition to those in the UK. According to CME Group's compilation of Bloomberg data, as of November 19, the Nikkei 225's earnings yield was 4point 9 percent, while the S&P 500's was 4point 1 percent.
The belief that Japanese stocks are cheap, particularly when compared to their US counterparts, is supported by additional valuation metrics like price-to-sales and price-to-book valuations.
Stevenson claims that although Japan appears intriguing, "Europe looks more challenged, and recovery in China will be muted."
Because of their stretched valuations, Stevenson generally advises staying away from US megacaps whenever feasible.
In order to generate income, this may entail investing in global income funds rather than tracker funds, which will be oversaturated with tech megacaps.
Benefits of bonds: diversification or income?
Vanguard Europe's head of asset allocation, Giulio Renzi-Ricci, thinks "bonds are still back" and that yields in the US will probably stay above the 4 percent curve in 2025. According to him, bonds can stabilize any long-term portfolio by counteracting changes in other investments, especially stocks.
According to Raithatha, these high yields make bonds an especially alluring investment right now because they can act as a coupon wall, ensuring positive returns even in the case of a slight increase in interest rates.
Instead of recommending bonds for diversification, Kyrklund suggests holding them for income.
"Bond yields remain highly appealing. "They are an excellent source of revenue and return for customers," she says. Additionally, she thinks they are "tactically cheap" at the moment.
Over the next ten years, Raithatha anticipates that sterling investors will receive a return of 45 percent for UK bonds and 45 percent for global ex-UK bonds.
The bond curve has re-normalized in recent months as the US and Europe seem to be avoiding major recessions.
According to Oliver Faizallah, head of fixed income research at Charles Stanley, "we expect short-end bond yields to continue falling in 2025, while longer-term bond yields may stay anchored at higher levels, resulting in the yield curve steepening further and pushing the term premium higher."
Commodities: is gold a good investment?
As a more efficient way to diversify away from stocks in the current climate, Kyrklund suggests commodities over bonds.
This decade has generally seen advantages to owning commodities from a diversification perspective, in contrast to the previous decade when commodities truly offered no diversification.
One especially astute way to diversify through commodities seems to be to invest in gold.
Given how well gold has performed this year, some people might be forgiven for believing that the time isn't right to purchase gold.
Still, Kyrklund thinks it provides a good hedge against the current high levels of fiscal spending and better diversification from stocks than from bonds.
"Gold can be another hedge against any negative news from the US and inflation remaining sticky," Coatsworth says.
Remember the 1970s? During a time of high inflation and geopolitical tension, particularly in the Middle East, commodities, particularly gold and oil, outperformed everything else.
In 2025, copper is another commodity to watch. Jacob White, the ETF Product Manager at Sprott Asset Management, states in HANetfs' outlook that "the copper market is entering 2025 with a widening supply-demand deficit."
The combination of "persistent supply-side constraints" and the growing structural demand for copper, which is crucial for the transmission of electricity, is what is causing this.
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