2025 Market Outlook: Embracing Change and Unlocking Opportunities

Reflecting on 2024

From the growth stocks rally through to the attention drawn towards the presidential elections, 2024 was a year dominated by the US. Capital allocation gravitated to the news, particularly towards US mega-cap stocks. The Magnificent Seven were up by an average of 63% during the year and accounted for one-third of the S&P50.

Aura's Approach to Multi Asset Strategy for 2025

This 2025, we see reason to take a more cautious stance than last year. Price action throughout 2024 and related valuation metrics lead us to believe that investors should expect rising levels of volatility and the rotation of capital from the previously dominant trends. At Aura Group we believe that seeking relative value across markets and different asset classes will provide more stable risk adjusted returns for investors, including higher diversification benefits for multi strategy portfolios, especially in a period of higher volatility because of momentum reversals from favoured positions in 2024. A key trigger we see for rising volatility will be the directional movements and control over US inflation.

Rising Inflation Risk and Bond Market Signals

Currently, bond markets are indicating inflation risk as evident by rising bond yields when the Federal Reserve has been cutting rates. Our read on the bond markets is that the Federal Reserve may have acted too early on their rate cutting cycle before a stable trend of inflation being under control had been formed. While the work of the Federal Reserve is not easy, we did witness a similar error with the increasing of rates. Recently, 10-year Treasury yields broke technical levels, which can be used as a key measure of inflation expectations. As such we expect an increase in US inflation risk in 2025. Long-term data shows there is a strong relationship between inflation (specifically inflation at 3%) and the correlation between equities and bonds. Given their importance as a forward indicator, we have been focused specifically on bond yields and curves. As a multi strategy manager, we prioritise diversification benefits across different styles, asset classes and regions, aiming for long term smooth compounded returns into the future.

Portfolio Positioning for 2025

This year, we will continue to ensure the portfolio remains nimble so that we may act in a volatile environment to reduce losses of our investors’ capital. This will include having dry powder to deploy when opportunities present.

Monitoring and constantly testing asset class and positional correlations is always a priority. This includes taking exposures in alternative asset classes with tested long-term diversification benefits to aid in mitigating core portfolio exposure risks. When implementing, we always ensure we are appropriately compensated for taking any risks, while skewing towards higher quality investments should fundamentals shift.

Aura Global Endowment Strategy

Aura Global Endowment Strategy is a diversified and actively managed strategy that provides:

• a diversified investment approach
• focus on smooth and attractive long-term risk adjusted returns
• management with over 15+ years experience with similar strategies, with no reported negative financial or calendar years over that period

Learn more: Aura Multi Asset Strategy