Don’t Fall for the Noise: What Investors Need To Know About Market Risk in 2025
Written by
Laura Bogart
Edited by
Kristen Mae
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Forecasting is a tricky endeavor, whether someone is predicting the volume of rainfall set to hit a major metropolitan area or how the stock market will fare on any given day. Often, when watching the weather forecast or market report, you can feel overwhelmed by the sheer volume of guesses. It all feels like noise. And all you want is a kernel of real knowledge. Should you bring your umbrella along in the car? Is it time to snap up that tech stock you’ve had your eye on?
Peter Lazaroff, CPA, CFP, and chief investment officer of Plancorp Wealth Management, says there’s a core question that can help you cut through all the noise: Which insights are useful for investors?
To explore the answers to that question, Lazaroff enlisted Dr. David Kelly, chief global strategist at J.P. Morgan Asset Management and one of the most respected macroeconomic forecasters in the industry. Appearing on Lazaroff’s podcast, the two offered their takes on what investors should know in 2025.
Watch for Key Policy Shifts
Kelly wants investors to be mindful of certain policy shifts that could impact the market. Notably, he points to tariffs as key factors to watch. By reducing global trade and economic growth, tariffs can cause disruptions across key industries. Savvy investors track tariff developments and take note of which industries will be affected.
But tariffs aren’t the only policy shifts Kelly wants you to be mindful of. He also says that, should Congress extend certain provisions of the Tax Cuts and Jobs Act — while adding other cuts, such as reductions in income tax on tips and overtime, as well as corporate tax breaks and deductions for R&D — it could stimulate consumer spending and corporate profits. Unfortunately, these measures might also add to the federal deficit.
You Don’t Need to Go All in on the “Magnificent Seven”
While the “Magnificent Seven” may conjure images of gunslinging heroes from the 2016 film (itself a remake of “Seven Samurai”), investors recognize the term as referencing a group of mega-cap technology stocks that have achieved dominance in the market.
Kelly suggests that some of these companies may remain dominant, while others could face challenges in staying on top. Investors should be mindful of valuation concerns that arise when other investors have priced these companies at high multiples, he said.
He also warns that market enthusiasm can create bubbles — remember the dot-com boom and bust? — that will eventually burst. Additionally, he notes that “as more investors pile into index funds, mega-cap stocks receive disproportionate capital inflows, fueling further concentration.”
It’s Time To Diversify Globally
Even the most knowledgeable and sophisticated investor can fall into the trap of overallocating U.S. stocks in their portfolios. Kelly advises investors to think globally. He points out that, if the U.S. dollar weakens, international investments could help offset domestic market risks.
In his opinion, European markets in particular are less tech-heavy and more diversified, while providing you with high dividend yields. Emerging markets also offer long-term growth potential, but Kelly warns that political changes and currency fluctuations present very real concerns.
At the end of the day, being aware of the goings-on both at home and abroad can boost your investing IQ. Working with a trusted professional and learning to diversify will remain smart strategies, no matter what happens in the broader market.
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