But first, let’s look back at 2024. Despite the high levels of uncertainty and volatility that have characterised the year, multi-asset strategies have performed remarkably well. We’re pleased to report a strong showing across the MyFolio portfolios (visit our website for full details).

As always, the MyFolio team remains committed to providing long-term solutions that help your clients navigate the evolving financial landscape. So, what are our concerns and focal points for 2025?

Regulatory updates

The regulatory environment continues to evolve, impacting advisers and their clients. We actively address any change to ensure compliance and support our clients through these transitions. Top of our priorities in 2024 has been SDR (FCA’s Sustainability Disclosure Requirements) which came into effect on 2nd December 2024.

As part of the SDR transition, the MyFolio Sustainable and Sustainable Index ranges were renamed MyFolio Enhanced ESG and MyFolio Enhanced ESG Index, and classified as ‘unlabelled with Sustainable Characteristics’.  

We’re very pleased with this outcome. While we’re fully supportive of the FCA’s approach to labelling, the MyFolio funds don’t currently lend themselves to the four SDR labels. It was vital to us that we retain the core philosophy and process employed across the MyFolio suite for the past fourteen years. We were pleased to be granted approval from the FCA for the use of the name ‘Enhanced ESG’.

These changes allowed us to keep the central MyFolio philosophy and process, while giving investors access to underlying funds with clear sustainability characteristics.

Inflation

While inflation posed challenges in 2024, it has gradually decreased to more manageable levels throughout the year. The incoming US administration's policies, such as tax cuts, deregulation, higher tariffs, and reduced immigration, could stimulate economic activity but also carry the risk of pushing inflation higher. These measures might lead to higher consumer spending, increased business activity, and labour shortages, contributing to wage pressures and production costs.

Despite these potential inflationary pressures, MyFolio portfolios are strategically positioned to manage such risks. Diversification across multiple asset classes mitigates the impact of inflation. By balancing investments in equities, bonds and other asset classes, we aim to provide stability and growth opportunities regardless of inflation trends.

Our forward-looking approach, which leverages long-term expected returns rather than short-term performance, helps us to remain resilient in the face of market volatility. This adaptability means we can adjust our strategies as economic conditions evolve and maintain our commitment to targeting favourable performance for our investors.

Interest rates

The global interest rate-cutting cycle is expected to persist into 2025, albeit at a moderated pace due to the new administration in the US.

The Federal Reserve has initiated two cuts amounting to 75 basis points, but further reductions may be less aggressive as the administration's policies stimulate economic activity.

In Europe, the ECB is likely to continue its rate cuts as growth cools, particularly in Germany. Japan, however, is poised to increase rates amid robust wage growth and yen depreciation. Emerging markets are experiencing varied impacts, with countries like India benefiting from globalisation shifts, while others may see less monetary easing. 

We’ll monitor this easing cycle closely and adjust MyFolio's strategic and tactical positioning as circumstances change. This entails a vigilant approach to global monetary policies and a flexible investment strategy. By staying attuned to these economic shifts, we aim to ensure our portfolios can adapt.

Outlook for 2025

Looking ahead to 2025, the outlook for multi-asset investors in MyFolio remains promising.

We’re broadly optimistic about corporate risk but have adopted a more neutral stance on duration. This outlook is based on expectations of a more reflationary environment in the US, driven by Republican leadership, which should lead to higher nominal GDP growth.

Changes in US policy could lead to more monetary easing in Europe and increased stimulus in China, while many other emerging markets (EMs) might see less monetary easing. Equities have performed well this year, leaving developed market (DM) valuations elevated and concentration high. However, we see ongoing fundamental support for corporate earnings. 

Despite the positive outlook, several risks remain. One potential risk is a ‘Trump trade war 2.0’ that could push inflation up and growth down, leading to selloffs in equities and bonds. Another risk is escalation in the Middle East, which could drive oil prices higher. Additionally, interference at the Federal Reserve and a return of deficit worries could pose challenges.

Overall, while there are risks to consider, the outlook for MyFolio in 2025 is underpinned by a positive view on key asset classes and strategic opportunities in the market. We’re focused on identifying these areas and positioning our portfolios to capitalise on them.

Diversification

While we’re optimistic about the market outlook, uncertainties exist, and market concentration, particularly in the US, is high (see our previous article for more on how to navigate this risk).

One feature of 2024 has been the dominance of US equities, especially a select few companies often referred to as the ‘Magnificent Seven’. If we look at the MSCI World index, for example, the Magnificent Seven represent a whopping 21.9% of the market, while US companies represent 72.1% of the index.(1)

This means the benefits of multi-asset investing are more pronounced than ever. Diversifying across different asset classes allows investors to reduce risks linked to any single asset class or investment and to gain from the stability provided by diversification.

We use long-term expected returns to position portfolios strategically rather than focusing on past performance. This balanced, forward-looking approach is crucial in today's volatile and concentrated markets.

Investing in a mix of equities, bonds, and other assets from different regions allows investors to benefit from various economic cycles and growth opportunities. This global perspective helps navigate the complexities of interconnected markets.

Final thoughts

A robust multi-asset approach can help your client spread risk, weather economic uncertainty, and achieve long-term investment goals. We believe the MyFolio family of funds is well-placed to serve your clients in the months and years ahead, thanks to its longstanding investment process.

More about MyFolio

MyFolio is a cost-effective outsourced investment solution offering a range of risk-targeted funds.

For more information, visit our website or speak to your local business development manager.