As we navigate the investment landscape of 2025, it is crucial to examine the prevailing market views and their potential implications for portfolio management. The consensus outlook, shaped by the majority of market participants, sets the tone for expectations and drives market sentiment. However, it is equally important to consider less consensus and contrarian perspectives, as they offer valuable insights and challenge the status quo.

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The relevant portion of the video runs from 11:31 onwards.

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The Consensus Views:

1. U.S. economic exceptionalism and outperformance will persist, driven by pro-business policies and deregulation.

2. Global growth will remain solid but uneven, with Europe and China facing challenges while the U.S. leads the way.

3. Inflation will stay elevated but contained, as trade barriers and immigration curbs counteract disinflationary forces.

4. U.S. equities are expected to outperform other markets, though returns may moderate after a strong run.

5. Credit is favoured over government bonds as a source of yield, despite tight spreads.

6. The U.S. dollar will remain strong in the near term, supported by economic strength and policy divergence.

The strong consensus around U.S. exceptionalism and the continuation of current market trends carries inherent risks. When a dominant narrative takes hold, it can lead to complacency and a disregard for alternative scenarios. If market participants begin to question the sustainability of U.S. growth or the effectiveness of policy measures, a sudden shift in sentiment could trigger significant volatility and asset repricing.

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The Less Consensus Views:

1. The severity and impact of trade wars on global growth and markets.

2. The pace and magnitude of monetary policy changes, particularly in the U.S.

3. The long-term trajectory of the U.S. dollar and its implications for global markets.

Amongst the less consensus views, such as the debate around trade wars and monetary policy, the uncertainty comes with a silver lining - with many different views holding sway across the market we are less likely to see high levels of volatility and market disruption associated with these themes as events unfold (everyone is not on the same side of the boat, so it might be less of an issue if many people switch sides).

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The Contrarian Views (Under-appreciated Risks and Opportunities):

1. The potential for a slowdown or recession in the U.S. economy, given extended valuations and late-cycle dynamics.

2. The attractiveness of emerging markets, which may benefit from a shift in global growth drivers and a weaker dollar.

3. The resilience of European equities, which could surprise to the upside as political risks subside and growth stabilises.

4. The importance of small-cap stocks, which may outperform in an environment of domestic-focused growth and policy support.

5. The value of commodities beyond gold, as demand-supply dynamics and geopolitical factors come into play.

Contrarian views, often under-appreciated by the broader market, can offer valuable diversification benefits and potential alpha generation. By identifying and capitalising on miss-priced assets or overlooked trends, contrarian investors can build more resilient portfolios that are less vulnerable to consensus-driven market movements.

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What does this mean for portfolios

To navigate the complexities of the 2025 outlook, portfolio managers should adopt a balanced approach that incorporates elements of consensus, less consensus, and contrarian views. This involves:

1. Maintaining a globally diversified portfolio that can withstand shifts in market leadership and economic conditions.

2. Employing active management strategies to identify and exploit miss-pricing opportunities arising from consensus-driven market inefficiencies while also using passive tools to change exposures as and when necessary.

4. Regularly reassessing and adjusting portfolio positioning as new information and market developments emerge - we think there will be quite a lot of that in the next six months.