2025 looks set to be a pivotal year for the global economy for many reasons. From a unique political landscape to shifting environmental factors and economic structures, this article will explore some of the key economic challenges of 2025 and how to tackle them.
Key Economic Challenges for 2025
Inflation
Inflation can reduce your purchasing power and how much your savings are worth. It can also cause issues in your investment portfolio, bringing down fixed-income investments in particular.
Nobody likes it but inflation is highly likely in 2025, largely down to the supply chain disruptions predicted from Trump’s tariffs and increasing energy prices.
Global change
Consumer behaviours, technologies, and global power dynamics all have a role to play in wealth management, and all are set to experience a state of flux in 2025. This means that many investment opportunities will likely change in the coming year for investors in the UK and beyond.
Political instability
Donald Trump becoming US president will likely lead to some issues with other leaders. Firstly, he’s promised worldwide import tariffs of 10% with up to 60% charged to China, which will likely result in global trade disputes and tensions around the world.
This, partnered with the lasting effects of Brexit, will likely result in political uncertainty which generally leads to market volatility.
How to Manage Your Wealth in an Uncertain 2025
Diversify, diversify, diversify
Diversification should define your investment portfolio and how you approach the rest of your wealth management activities. This means accessing as many savings and income opportunities as possible to reduce risk, as well as investing in different types of products.
Account for inflation
Consider investments that have historically performed well in high-inflation periods. These include inflation-linked bonds, equities in traditional energy companies, healthcare, and technology. You should also review your financial situation regularly to account for changes.
Scenario planning
Speak to your wealth manager about scenario analysis to prepare for worst-case scenarios regarding the economy. This can help you prepare for volatility with a financial plan that mitigates its effects.
Plan with tax-efficiency in mind
Leverage ISAs, pensions, and other tax-efficient opportunities to maximise returns in an unpredictable, high-tax year. Ensure investment portfolios are balanced in line with upcoming regulation changes to IHT and CGT where applicable.
Conclusion
While many experts predict that 2025 will be volatile, there are strategies to help you preserve and grow your wealth. With diversified investments built for the future, tax-efficient saving strategies, and alternative income streams, you should be able to navigate 2025 successfully.
Of course, it’s always best to speak to a wealth management expert when it comes to your finances, so contact our team at 020 8366 4400 or email enquiries@cedarhfs.co.uk for more information.