Here's Why 2025 Has Seen Popular Investment Strategies Fall Apart

Is US exceptionalism over? Tech stocks were in, then out, then in again. Have rumours of the dollar's demise as a safe haven been greatly exaggerated? 2025's market turmoil has forced investors to rethink strategies which have long yielded results, but are these shifts lasting? Our Markets Live Managing Editor Kristine Aquino joins host Stephen Carroll to discuss.

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Episode Transcript

Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news.

Speaker 2 (00:08):
I'm Stephen Carroll and this is Here's Why, where we
take one new story and explain it in just a
few minutes with our experts here at Bloomberg. The ongoing
changes create the opening for a global euro moment.

Speaker 1 (00:28):
Even if you're a dollar based investor, you should be
thinking about increasing your allocations to none dollar investments. You know,
we got up to one fifteen in euro dollar and
then put all the way back down towards one eleven.

Speaker 2 (00:40):
Like that kind of thing is going to keep happening.
There is a declining trend of the US exceptionalism, and
particularly when we talk to global investors, the willingness to
diversify on a global basis. I think it's getting higher
these days. If you blink, you're risk missing a market melt.
And a lot has changed in the world in the

(01:01):
first few months of twenty twenty five. There's been a
whirlwind of announcements from the Trump White House. Europe is
racing to rearm Germany's loosening its purse strings. The pace
of change has set investors on edge. Many are now
questioning what were considered established market principles, ones that had
a track record of making money until now. Here's why

(01:22):
twenty twenty five has seen popular investment strategies blown apart.
Our Market's Live managing editor, Christine Aquino, joins me now
for more, Christine, good to talk to you. Can we
start with some examples? What were the ideas or principles
that investors used to rely on and I've been thinking
differently about since the start of this year.

Speaker 1 (01:44):
Yeah, absolutely, Steven. I mean, we have a lot of
these that are long held principles in markets that have
really started to be challenged, especially in the beginning of
this year, right. So one of them is definitely this
idea that the US dollar and treasuries are full proof
havens during times of stress. There's also the notion that
there's no way to go for the Magnificent seven but

(02:07):
up because you know, even in times of inflationary environments,
they tend to be more resilient because they have a
lot of cash flow, they have enough growth in the
companies that are in that group. And then, of course
the sixty forty investment strategy. Now that's been questioned even
prior to the start of this year, but I think

(02:27):
even more so since the beginning of twenty twenty.

Speaker 2 (02:29):
Five, the sixty to forty portfolio sixty percent invested in stocks,
forty percent invested in bond. Something that we hear a
lot about are all of these changes because of Donald Trump.

Speaker 1 (02:39):
He was definitely a big catalyst ever since President Donald
Trump took office, and it's particularly because of some of
the known aspects of his policy approach. Right, we knew
even before he took office that he was going to
take a look at the US's trade deals with the
rest of the world and attempt to redraw a lot
of that policy. And then of course a lot of

(03:00):
focus on immigration as well. And you know, that combination
had a lot of people really bracing for a renewal
of inflation in twenty twenty five.

Speaker 2 (03:09):
So what are the other factors at play then outside
of the United States.

Speaker 1 (03:13):
Well, Stephen, you know, because the US has enjoyed this
sense of exceptionalism, I would say over the past decade,
the result of that is that a lot of valuations
outside of the US have really become cheaper, you know,
and now that we're seeing US markets being on a
little bit more shaky ground, that cheaper valuation outside of

(03:33):
the country has really become a bigger draw for investors, right,
because they're cheaper and now they're looking like more of
a viable alternative to US assets. And outside of markets,
we've also seen a number of leadership changes in a
lot of other countries. Twenty twenty four was a big
gear for global elections, and you know, a lot of
leadership changes means that for countries, their diplomatic relationships are

(03:57):
bound to change. At the focal point of that, of course,
is Presidentald Trump and how he's really shifting the US's
diplomatic relationships with some of its more traditional closer allies.
And also it's farther flunk counterparts.

Speaker 2 (04:11):
So money managers have to adapt their strategies all the time, right,
But how does this moment compared to other periods in
the past where we've seen big fundamental shifts.

Speaker 1 (04:20):
I think what we're really hearing from money managers is
the fact that they're having to contend with a higher
than usual level of volatility, and what that really means
is that their reaction time has to be faster, it
has to be more tactical. You know, we're not necessarily
seeing a lot of money managers making big calls and
making long term proclamations because it's really difficult in this

(04:44):
current environment to do that, and so now they have
to be quick twitched, they have to be really reactive,
which is quite a different environment, especially if you're a
money manager who's used to, you know, making big investment
decisions once a year, maybe changing up your portfolio every
but not really having to mix it up all that much.
But yeah, now this is a really different environment. And

(05:08):
I think the other thing too, that we spoke to
earlier is the idea that there are a lot of
these long held quote unquote truths in markets that are
now really being challenged, and so a lot of money
managers really just can't rely on those anymore.

Speaker 2 (05:22):
Yeah, even that expression quick twitch makes me nervous when
I hear it. What about the lasting effect of these changes.
Can we say, for example, that the era of US
exceptionalism is over.

Speaker 1 (05:32):
Well, I don't think anyone's quite ready to proclaim that
just yet, but you do definitely see enough of a
diversification shift potentially that some of these previously held notions
in markets become a more water down version of their
previous selves. Right, even though the US will always have
the advantage of Tina, which is there is no alternative

(05:54):
because a lot of its markets, both in stocks and
fixed income, deepest, biggest, broadest markets in the world. But
we might be seeing enough of a shift in portfolio
flows that even though that's still true to some extent,
it probably won't be to the same degree as we
have seen in years past.

Speaker 2 (06:14):
Now, Christine, you are Queen of Markets at Bloomberg, Are
there any unusual market trends that you're keeping an eye
on in the coming months.

Speaker 1 (06:21):
Well, I'm always a macro person at heart, and so
I'm really really interested in the shift in the dollar's
role in how investors are viewing it, because we have
seen it shift from a full proof, trusted haven during
times of previous episodes of turmoil. I'm talking about the
global financial crisis and even during the COVID years, and

(06:42):
now it's really struggled to rally and it almost has
become the face of the Cell America trade. And that's
really interesting that investors have been so quick to shift
their their views and a dollar, and I'm curious to
see whether it regains back a lot of that status
that it enjoyed before, or is it now fundamentally changed

(07:04):
the other thing that I'm really looking at with interest
is this idea that macro factors taking a backseat to
politics in terms of driving markets. Is that the new
world order? Now? You know, are we going to have
to become in addition to economic armchair experts, are we
going to have to become policy and politics experts as

(07:24):
well in this sort of market And you know, just
a question of for instance, federal reserve policy playing second
fiddle to whatever the Trump administration's policies are. So something
that I'd like to keep an eye on. For sure,
I'm going to.

Speaker 2 (07:37):
Be dusting off our politics books to read up on
some of the precedents of the past. Thanks to our
Markets Live managing editor Christina Quino. For more explanations like
this from our team of three thousand journalists and analysts
around the world, go to Bloomberg dot com slash explainers.
I'm Stephen Carol. This is Here's why. I'll be back
next week with more. Thanks for listening.