Geopolitical uncertainty, a rapid change in the geographic allocation of capital, and major elections with a wide range of potential implications helped define 2024. These developments will help shape the way investors allocate capital, making it more important than ever to build resilient portfolios that are diversified in their asset classes, regions, and liquidity profile. David Hunt, PGIM President and CEO, discusses major investment themes for 2025.

How did the investment landscape change in 2024?

• Geographic allocation of capital: 2024 brought a rapid change in the way investors allocated resources globally, fueled by divergent economic outlooks in the US, Europe, China, Japan and southeast Asia.
• Geopolitical uncertainty: CIOs are more focused on geopolitical and idiosyncratic risks, and less focused on traditional business-cycle risks, in the current environment. This is driving investors to engage in greater scenario analysis to assess the portfolio impact of potential political outcomes.
• Elections and fiscal consequences: It was a busy year at the polls with elections in the US, EU, UK, France, India and other major economies. Despite a general movement away from incumbencies, the biggest loser was the balance sheet. Many of these countries are on a path of greater fiscal stress, which will force investors to reassess the value of government debt in an overall portfolio.

How will these trends impact investors in 2025?

• The need for liquidity: If geopolitical risks lead to greater market volatility, institutional investors will need enhanced liquidity in their portfolios to capture the opportunities that emerge.
• Geographic diversification: Geopolitical risks, including the realignment of supply chains, have given new meaning to geographic diversification, which will be crucial in making portfolios more resilient as the political climate evolves.
• The evolution of asset classes: Whether it's asset-backed finance or the convergence of public and private fixed income, the list of available asset classes is growing. This will offer investors much-needed diversification in a world that is increasingly uncertain.