Equities Predictions in 2025: Hits and Misses

Staying Fully Invested — Hit. Perhaps our most important tactical recommendation last year was to remain neutral equities. While staying neutral all year may seem like a miss in such a strong year, and of course, an overweight would’ve been better, a downgrade was tempting given the volatility last spring around tariffs. So, we’ll call maintaining full equity allocations a win. Tariffs weren’t the only concern, with market concentration, excessively bullish sentiment, high valuations, deficits, and inflation among the many concerns cited by the bears. The Russell 3000 returned 17.1% in 2025.

Despite widespread concerns about market concentration when 2025 began, with massive market caps of mega cap tech stocks, staying fully invested in U.S. equity markets was the correct call last year. Not only that, but Bloomberg’s Magnificent Seven Index returned 26.8% for the year, led by Alphabet’s (GOOG/L) 66% surge, strongly outperforming the market cap weighted S&P 500 (+17.9%) and its equal weighted counterpart (+11.4%).

Large Growth Over Small and Mid Value — Hit. Continuing with the mega cap theme, our Strategic and Tactical Asset Allocation Committee (STAAC) maintained its preference for growth over value throughout all of 2025, with a large cap growth overweight and small and mid cap value underweight. The growth style paced large caps, with the Russell 1000 Growth Index outperforming its Value counterpart by 2.7% (18.6% to 15.9%) for the year. Meanwhile, small and mid cap value, measured by the Russell 2500 Value Index, underperformed large value and large growth with just a 12.7% return.

With prevalent calls for a rotation into value stocks throughout 2025, given significant optimism priced into stocks tied to the artificial intelligence (AI) theme, our focus on earnings and emphasis on technical analysis kept us in the growth trade throughout 2025 (as it did in 2024). Our expectations that the economy would slow down and confidence in growth stock earnings underpinned our preference for large caps over small last year.