Emily Roland

Emily Roland is taking a cautious view of the market outlook in early 2025 in view of the unusually strong performance of U.S. stocks over 2023 and 2024. The S&P 500 Index generated total returns of more than 25% in both years—the strongest back-to-back results since 1997/1998.

Looking ahead, she's trying to temper expectations: “It doesn't mean that we don't want to participate in this market. We absolutely do. But we really want to be mindful of the returns. A lot of it—if not all—has been on multiple expansion or sentiment driving stock prices higher.”

Against that backdrop, her mantra for 2025 is: “Don't turn up the volume in portfolios.” She’s also emphasizing opportunities beyond the relatively small group of growth-oriented stocks that led the market the previous year.

She added that 2025 presents asset allocation challenges due to the complexities of navigating a market where correlations between stocks and bonds have recently risen. Another complicating factor is the paradox of good economic news being perceived negatively by markets, as it suggests that the U.S. Federal Reserve (Fed) might hesitate to approve further interest-rate cuts owing to concerns that lower borrowing costs could reignite inflationary pressures.

“When those correlations rise, we want to look to parts of portfolios that can actually do well in these good news/bad news environments,” she said. “Market leadership typically starts to broaden out. You see areas like value doing better.”

Traditionally defensive sectors such as infrastructure, energy, and utilities present attractive opportunities, she said, as do dividend-paying stocks.

She described the U.S. economy as booming, with better earnings growth compared with international markets. While international equities present opportunities during periods of synchronized global growth, the current environment isn't yet conducive for the asset class, she said. The strength of the U.S. dollar and the prospect of increasing tariffs are additional market dynamics to watch in 2025, she said.

As for the investment implications, Emily emphasized key points from Market Intelligence, a publication summarizing our asset management network’s most compelling investment ideas for clients today.

In fixed income, she noted that a recent rise in bond yields offers increased potential for attractive returns.  Despite challenges such as inflation, the income potential from bonds remains appealing, in her view.

“Even though yields may chop around from here, we have an entry point that I think is really spectacular,” she said. 

“Don't turn up the volume in portfolios.”

—Emily Roland

Josh White

As a specialist in value investing, Josh White believes that value stocks have recently traded at prices that are roughly within their historical valuation range. In contrast, he views growth stocks and the S&P 500 Index broadly as overvalued from a historical perspective.

Within value equities, he said he’s finding an abundance of attractive bottom-up opportunities, notably in the financials, energy, industrials, and materials sectors.

Among the many current themes that he is watching is the new U.S. presidential administration’s emphasis on industry deregulation, particularly as it relates to financials: “I think that’s a sector that's been regulated almost to death over the past decade. Just loosening the reins on them a little bit is likely to unlock quite a bit of productivity and also just get revenue going from capital markets activity.”

He views airlines as another potential beneficiary of deregulation at a time when robust consumer demand for travel could benefit the industry.

“Millennials and Generation Z love to travel. They don't like to buy material goods,” he said.

He views traditional legacy carriers as better positioned to benefit from current trends than their low-cost competitors.  Legacy carriers are seeing growing demand for premium or business class seating, while their lower-cost peers are constrained by more limited airplane fleet capacity at a time when commercial plane manufacturers are having difficulties keeping up with orders to deliver new aircraft.

The lower-cost carriers “can't compete as aggressively as they used to, and they're ceding market share back to these legacy carriers,” he said.

The consumer staples sector and the packaged food industry are other areas that he’s watching closely amid expectations that the Trump administration will seek to encourage Americans to embrace healthier diets and eschew processed foods.

In utilities, he sees strong potential in the sector’s historically steady earnings growth and dividend payments.

“The utility rate base is really growing much quicker today than it has in the past, because of all the spending on data centers around the United States,” he said. “And that's probably going to continue for the next decade."

“Millennials and Generation Z love to travel. They don't like to buy material goods.” 

—Josh White 

Jeff Given

Jeff Given said it’s a favorable time for fixed-income investors to leverage opportunities from currently attractive bond yields, and he advised to avoid fixating on potentially fleeting macroeconomic shifts and on the timing and magnitude of incremental interest-rate cuts.

Recent fixed-income volatility has been fueled by frequent shifts in the Fed’s rate outlook, which has become increasingly data dependent as policymakers track sometimes-fleeting trends in inflation and economic growth, he said. Historically, investors have had greater visibility on the Fed’s medium- and long-term outlooks.

“The Fed's not sure what they're going to do after the next meeting or two,” he said. “That creates a lot more volatility in the marketplace. The market prices in a bunch of rate cuts, then all of a sudden, they price out all the rate cuts, and then they price them back in. And that whips rates around across the yield curve.

“Unfortunately, I think that data dependence is here to stay. You look at inflation concerns, growth concerns, tariff concerns—all of that's going to play a role. And it almost makes you want to be more long term-focused on what the path is going to be and where we’re going to be in two years. Maybe don’t get caught up so much in the noise over the next six months or three months.”

As for the prospect of rising tariffs, he’s not overly concerned about their potential market impact; he views tariffs as more of a trade negotiating tool than an inflation catalyst or obstacle to growth.

Given the recent rise in bond yields and the normalization of the yield curve, he believes it’s an opportune time for fixed-income investors to consider increasing the duration in their portfolios— despite the recently low visibility on the long-term rate outlook and relatively lower volatility for short-duration approaches. 

“There's nothing wrong with short duration,” he said. “I can understand why a lot of clients want to stay there, given there’s a lot less volatility. It's obviously been a difficult rate market to navigate over the last couple of years.”

However, by increasing duration and leveraging recently elevated yields, investors could potentially experience a favorable environment comparable to the one that many homeowners experienced a few years ago as they locked in low rates on long-term fixed mortgages before rates climbed with inflation.

The current opportunity is about “locking in higher yields now while you have them,” he said.  “You’re getting pretty attractive yields north of 5% in high-quality corporate credit. Securitized credit looks really good as well. It will lock those yields in for a longer period.”

“The upward-sloping yield curve helps quite a bit as well; short-term rates now are below long-term rates. So that gives a boon. And the flexibility of an intermediate-term strategy to add value in various sector allocations also makes a big difference.”

“You’re getting pretty attractive yields north of 5% in high-quality corporate credit. Securitized credit looks really good as well."

—Jeff Given

Tim Manning

Tim Manning is enthusiastic about the bottom-up stock selection opportunities that have emerged as a result of the U.S. equity market’s recent broadening, with market leadership expanding beyond the relatively small group of technology-oriented stocks that lifted the market higher the past few years. Beyond the scope of financial markets, he sees expanding growth potential across the broader economy as a result of AI, which could increase productivity across a range of industries outside tech.

“We’re seeing a broadening of earnings growth and estimate revisions, and it’s happening in more places than just in the more narrow tech sector,” he said.

Among the equity sectors that have recently drawn his attention are energy and industrials. As for energy, the investment process that his team employs traditionally shied away from the sector because many energy companies ranked low in terms of quality attributes and capital allocation. However, he’s seen a shift.

“In the United States, that sector has gone through a transformation in the past decade where discipline has been instilled, capital return to shareholders has increased, and there's a commitment to that,” he said.

He expects that shift to fuel growth for the energy sector, supplemented by increasing energy demand fueled by AI and data centers’ rising power needs, he said.

“It’s an amazing amount of demand that’s coming, and there are a lot of really high-quality names in the midstream energy area where we’re seeing less connection to volatility with the spot prices of energy, and there are longer-term contracts,” he said. “And with AI, now we’ve got a really great demand driver.”

While he shares his fellow panelists’ views that U.S. equity valuations remain high relative to historical averages, he said he continues to find plenty of attractive opportunities among growth-oriented companies with relatively low valuations combined with improving business fundamentals.

He said that across a broader universe of 500 stocks, roughly 150 names recently ranked highly based on valuations and business fundamentals. Even with relatively high current valuations for the broader market, “There's a sandbox for us to jump to,” he said. “There's so much more to do and so much more to go in this cycle as we broaden out.”

“We’re seeing a broadening of earnings growth and estimate revisions, and it’s happening in more places than just in the more narrow tech sector.” 

—Tim Manning