The economic landscape in 2025 will be shaped by Donald Trump’s presidency and a Republican-controlled Congress, says United Overseas Bank U11 ’s (UOB) Winston Lim, head of deposits and wealth management.
Interest rates are expected to continue falling, supporting the US economy, while global economic growth continues to influence investment decisions, Lim notes.
In this landscape, Lim identifies multi-asset strategy unit trust funds, quality dividend-paying stocks, investment grade bonds and money market funds as popular investment choices.
Multi-asset strategy unit trust funds
According to Lim, unit trust funds that adopt multi-asset strategies – with investments that span different asset classes, regions and sectors – are ideal choices for beginner investors seeking diversification and simplicity.
With the US economy expected to experience a gradual slowdown and Trump’s proposed policies creating uncertainty, these strategies enable investors to capture shifting market opportunities.
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The primary benefit of these funds lie in leveraging the expertise of professional fund managers at affordable management fees, making them suitable for long-term investors.
Furthermore, Lim adds that their inherent diversification reduces volatility and risk of large losses associated with holding individual stocks and bonds.
Quality dividend-paying stocks
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Quality dividend-pay stocks are another attractive option amid a falling interest rate and slowing growth environment. These stocks provide consistent and attractive dividends, offering stability and a reliable income stream.
Potential Republican policies favouring tax cuts and deregulation may enhance corporate profitability, further increasing the appeal of such stocks. Reinvesting dividends can also compound returns over time.
Importantly, Lim notes that dividend-paying stocks are generally less volatile than growth stocks, making them a safer option for beginners.
However, it should be noted that dividend payments are not guaranteed and can be reduced during economic downturns. Additionally, these companies usually exhibit slower growth potential compared to high-growth stocks, which may limit long-term capital appreciation.
Investment grade bonds
For beginners who are more risk-averse, investment grade (IG) bonds remain a safe and stable choice. IG bonds provide stable income and carry lower default risk compared to high-yield bonds.
Lim notes that bonds are particularly sensitive to interest rate changes, offering potential capital gains as bond prices rise when central banks lower interest rates.
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However, potentially higher tariffs, tax cuts and tighter immigration laws under the Trump administration may lead to higher inflation and rising fiscal deficit, which may slow the pace of interest rate cuts.
“That said, IG bonds are still expected to provide a reliable income stream and act as a portfolio stabiliser amid economic or geopolitical uncertainty, making them suitable for cautious investors,” Lim adds.
Money market funds
Money market funds invest in high-quality short-term debts and other cash equivalent instruments. These funds provide liquidity, safety and diversification, making them flexible tools for navigating uncertain conditions.
Although money market funds typically offer lower returns and face the challenge of inflation eroding purchasing power, their ability to preserve capital and provide quick access to funds make them a key component of a balanced investment strategy.
For investors prioritising stability in an unpredictable economic landscape, Lim states that money market funds remain a prudent choice.
