Market Outlook 2025: Positioning for Stagflation Risk

Based on our quantitative analysis at iSectors^®, mainly through our Post-MPT Allocations ETF model portfolios, several significant trends are emerging for 2025.
Key Economic Concerns
Stagflation appears to be the primary market risk as we approach 2025. This economic condition is marked by the following:
•    Slowing or declining growth
•    Rising unemployment (trending up since early 2024)
•    Persistent inflation
Strategic Portfolio Adjustments
We've recently increased our exposure to two vital defensive sectors:
•    Energy Sector
•    Historical outperformance during inflationary periods
•    Recommended exposure through Vanguard Energy ETF (VDE)
•    Provides access to major energy companies like Exxon, Chevron, and ConocoPhillips
•    Gold
•    Strong performance during both inflationary and recessionary periods
•    Recommended exposure through Aberdeen Physical Gold Shares ETF (SGOL)
•    Direct correlation to gold prices through physical bullion backing
Policy Considerations
The potential implementation of new administration policies, particularly regarding tariffs and taxes, could:
•    Complicate the Federal Reserve's inflation management efforts
•    Lead to prolonged higher interest rates
•    Currently unknown effects on economic growth

These factors reinforce our strategic positioning in energy and gold as protective measures against potential stagflation risks in 2025.