Outlooks

2025 Market outlook: 5 challenges, 5 opportunities

After scaling a wall of worry, public markets now appear priced for perfection. But lofty valuations and policy uncertainty pose risks.

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February 4, 2025 | 10 minute read

What are this year’s essential trends across macro, policy and key markets?

After scaling a wall of worry, public markets now appear priced for perfection. There are plenty of reasons for optimism, especially in the U.S. economy, but lofty valuations and policy uncertainty pose risks. We see significant opportunity in private markets in 2025 as M&A activity rebounds.

Building on this outlook, 2025 presents a landscape where optimism is plentiful, but markets require careful navigation. While the U.S. economy remains a global standout, the challenge lies in finding attractive valuations in public markets, which are priced for a Goldilocks scenario.

Private markets, on the other hand, offer compelling alternatives, particularly in the middle market, private credit and secondaries. As investors seek to balance risk and return, a diversified approach incorporating private market strategies may be key to capturing value in the year ahead.

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Any projections, forecasts and estimates contained herein are based upon certain assumptions that the author considers reasonable. Projections are necessarily speculative in nature, and it can be expected that some or all of the assumptions underlying the projections will not materialize or will vary significantly from actual results. The inclusion of projections herein should not be regarded as a representation or guarantee regarding the reliability, accuracy or completeness of the information contained herein, and neither FS Investments nor the author are under any obligation to update or keep current such information.

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Andrew Korz, CFA

Executive Director, Investment Research

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