A Closer Look at What is Driving Performance in 2025
Diversification and disciplined allocation are fundamental drivers of long-term portfolio success, especially in today’s volatile and expensive market.
Watch September’s Cup of Joe to learn why diversification has been such a big advantage in 2025. Joe explains how a 60/40 allocation reduced volatility during market swings, shares what the Fed is doing to balance inflation and unemployment, and reviews why today’s expensive stock market calls for discipline. He highlights why strategic allocation is the biggest driver of returns and how staying consistent through uncertainty can strengthen long term outcomes.
Watch September’s Cup of Joe
Get the full breakdown in this month’s video.
Asset Allocation a Big Benefit this Year
A diversified mix of 60% stocks, 40% bonds, spread among different asset classes has performed well in 2025, with only half as much drawdown as the S&P 500 during April’s volatility. Other asset classes such as International stocks, Emerging Market stocks, and Real Assets have been meaningful contributors while the US market struggled.
Strategic Allocation is the Biggest Driver of Portfolio Performance
Your Strategic Allocation is your target balance of stocks, bonds, and cash based on your growth needs, time horizon, and appetite for risk. This is the biggest determinant of performance relative to risk.
What the Fed is Trying to Do?
With its dual goals of full employment and stable prices, the Fed is trying to slow rising unemployment (by lowering interest rates) and make sure inflation does not accelerate (which may cause them to raise rates). Lower rates may boost the stock market and benefit client portfolios. But subduing inflation means keeping prices down for all consumers.
The US Stock Market is Expensive
There are now ten companies valued over $1 Trillion. Oracle rose over 40% in a day after beating earnings and signaling AI growth. Every sector in the S&P 500 is above it’s 20 year average forward P/E. It is wise to expect volatility in an expensive market.
Joe Gallemore CIMA®, CExPTM
Partner & Director of Investment Management
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