The 2025 Wealth Outlook by Citi Wealth explores strategies for navigating a unique global expansion described as “rule-breaking.” Despite traditional indicators signaling economic slowdowns, global growth has persisted due to innovation, productivity gains, and resilient consumer demand. The report emphasizes staying fully invested while broadening portfolio horizons to adapt to evolving risks and opportunities.
Key Themes
- Rule-Breaking Expansion
- Continued global growth of 2.9% in 2025 and 2026 is expected, driven by the U.S. and innovation, notably in AI and advanced manufacturing.
- Risks include geopolitical discord, potential trade wars, and economic overheating in certain regions.
- Broadening Horizons
- A core portfolio with global diversification is critical. U.S.-focused allocations, while historically successful, may underperform in the coming decade.
- Alternative investments, including private equity, private credit, and real estate, are increasingly essential for suitable investors seeking higher returns.
- Unstoppable Trends
- AI, climate-focused innovations, healthcare advancements, and the U.S.-China rivalry are pivotal forces reshaping investment landscapes.
Macro Insights
Economic Growth
- Global GDP Forecasts:
- U.S.: 2.4% in 2025, supported by deregulation, tax cuts, and manufacturing reshoring.
- China: 5.2%, driven by domestic demand and industrial policy.
- Eurozone: Modest at 1.2%, reflecting structural weaknesses.
- Corporate Earnings: U.S. companies are expected to lead earnings growth, with global EPS forecasts also improving.
Geopolitical Risks
- Rising geopolitical tensions, especially between the U.S. and China, could disrupt supply chains and global trade.
- Potential tariffs and retaliatory measures might hinder growth in export-reliant regions like Europe and parts of Asia.
Asset Class Outlook
Equities
- U.S. Large-Caps: High valuations suggest modest long-term returns. Smaller and mid-cap companies with domestic exposure may outperform.
- Emerging Markets: India and East Asia (notably AI-driven markets) offer growth potential. Brazil provides a diversification opportunity with a rebound in earnings.
- Japan: Attractive due to corporate reforms and undervalued equities.
Fixed Income
- Investment Grade Bonds: Favored for their yield advantage over Treasuries. Municipal bonds are highlighted for additional return potential.
- High-Yield Credit: Offers higher returns but comes with greater risk. Differentiated credit like preferred securities and bank loans is gaining interest.
Alternative Investments
- Private Equity:
- Focused on sectors like technology, healthcare, and climate innovation.
- Secondary private equity markets are highlighted for liquidity and strategic opportunities.
- Private Credit: Growth expected, with yields surpassing leveraged loans.
- Real Estate: Positioned for recovery, particularly in industrial and hospitality sectors.
Unstoppable Trends
- Artificial Intelligence:
- Early-stage growth with significant investment in semiconductors and data infrastructure.
- East Asian markets like Taiwan and South Korea are well-positioned to capitalize on semiconductor demand.
- Climate Innovation:
- Investments in renewable energy, green infrastructure, and advanced technologies to combat climate change.
- Policy-driven initiatives in developed markets and rapid urbanization in emerging economies are driving opportunities.
- Healthcare and Longevity:
- Biotech and pharmaceutical advancements offer growth, with private equity playing a significant role in supporting innovative firms.
- U.S.-China Rivalry:
- Key sectors like semiconductors, defense, and critical resources are focal points.
- Geopolitical alignment and resource security shape the investment landscape.
Portfolio Positioning
Strategic Allocation
- Focus on equities (60.9%) with an overweight to U.S. markets, balanced by emerging and developed international markets.
- Fixed income allocation (37%) emphasizes investment-grade credit and thematic opportunities like structured credit.
Tactical Adjustments
- Adjustments to increase exposure to high-growth sectors like AI, mid-cap U.S. equities, and alternative assets.
- Favor private markets for their potential to deliver uncorrelated returns and access to niche growth sectors.
Diversification
- A broader mix of asset classes, including hedge funds and real estate, is recommended for enhanced resilience against market volatility.
Citi Wealth’s 2025 Outlook emphasizes the significance of maintaining a globally diversified, long-term investment strategy. Leveraging unstoppable trends like AI and climate innovation, alongside alternative assets, offers opportunities for growth amid a discordant global environment. The report stresses disciplined execution and vigilance against geopolitical tensions and economic overheating risks.
