2025 Outlook
The Cambridge Associates 2025 Outlook features our investment outlook for 2025, separated into eight key investment themes.
2025 Outlook
2025 Outlook: Cross Asset
We expect global equities to outperform bonds, as near trend economic growth should support continued corporate earnings growth and healthy risk appetite. Stock/bond correlations should be lower than the 2023–24 peak levels, even as protectionist US policy may drive global economic uncertainty higher.
2025 Outlook: Interest Rates
We expect most major central banks to continue cutting policy rates, which should allow bonds to outperform cash. With breakeven inflation rates likely to be range bound, returns of inflation-linked and nominal bonds should be similar.
2025 Outlook: Public Equities
We expect developed markets value and small-cap equities to outperform, given our economic views and their steep valuation discounts. Regionally, we believe US equity performance will not match the level set in 2024, allowing European, Japanese, and emerging markets equities to perform more in line with broader developed markets. Within emerging markets, strong Indian equity gains should moderate, while we doubt Chinese equities will collapse. At the same time, we expect long/short equity strategies will perform better than typical.
2025 Outlook: Private Equity & Venture Capital
We expect private investment performance to improve, as the impact from overinvestment in 2021–22 recedes. The asset class’s long-term performance should continue to attract individual investors and managers are creating pathways for them to more easily access opportunities. While M&A and IPO exit opportunities may improve, we believe the importance of continuation vehicles as an exit path will grow. In Asia, we expect Japanese buyout and Chinese venture capital transaction activity to increase.
2025 Outlook: Diverse Manager & Impact Investing
We expect California Carbon Allowances (CCAs) to recover from 2024 losses as clarity on supply reductions emerges. Meanwhile, impact private investment flows will favor strategies with faster distributions and commercial validation. Additionally, headwinds for private diverse manager allocations should ease, but the overhang of emerging funds may lead to consolidation or shutdowns, challenging managers.
2025 Outlook: Credit Markets
We expect liquid credit returns to decline due to low credit spreads and anticipated Fed easing. Direct lending returns should moderate but continue to outperform their liquid counterparts. Meanwhile, insurance-linked securities will continue to benefit from strong demand, and increased transaction volumes should support both specialty finance and credit opportunities managers. In emerging markets, currencies should become a tailwind for local bonds.
2025 Outlook: Real Assets
We expect public infrastructure equities to perform similarly to developed market equities in 2025, propelled by supportive regulations for energy transition and strong demand for power infrastructure to fuel AI. While we believe US REITs should underperform US equities, US private real estate funds raised in 2025 should generate above-average returns, benefiting from distressed deals and solid fundamentals.
2025 Outlook: Currencies
We expect the US dollar rally will ultimately cool, with early strength giving way to modest weakening. Meanwhile, gold returns are likely to moderate in 2025 after a surge in 2024. Emerging markets’ use of stablecoins should support positive crypto returns, driving blockchain innovations and investment opportunities.