2025 MARKET INSIGHTS

Key Points

• Policy Earthquakes and Power-Driven Economics: The transition from rules-based governance toward what we describe as “power-driven economics” reflects expanded executive authority, more frequent use of emergency powers, and a diminished role for traditional institutional constraints.

• Governance and jurisdictional risks, once more commonly associated with emerging markets, have become increasingly relevant considerations within the U.S. domestic framework.

• Labor and Foreign Policy Shifts: Economic stability is increasingly shaped by more coercive labor policy enforcement and a foreign policy approach that emphasizes leverage and power over traditional treaty-based norms.

• Market Concentration and "Bubbly" Valuations: The S&P 500 is highly concentrated, with the top 10 companies accounting for 40% of its total valuation. Many investors (63% of polled attendees) view current technology valuations as a bubble.

• Global Portfolio Outperformance: New Capital’s Global portfolios outperformed U.S.-only models in 2025, with Model 10 (100% stock) global portfolios returning approximately 25% compared to U.S. returns.

• AI Adoption Lag: Despite massive capital expenditures by "hyperscalers," a minority of firms across most sectors have actually implemented AI in business functions as of December 2025.

• Strategic Liquidity and "Privates" Avoidance: In an environment of fast-moving shocks, the firm prioritizes liquidity—the ability to convert assets to cash overnight—and is avoiding illiquid private investments.

• Fixed Income Adjustments: Bond duration was increased incrementally as Fed funds rates fell and the yield curve normalized; however, Treasury exposure was reduced in response to rising domestic governance concerns and broader policy uncertainty.

• Currency and Jurisdictional Diversification: New allocations to international bonds (hedged and unhedged) aim to reduce reliance on the U.S. dollar, while Swiss custody accounts are utilized for higher-net-worth clients seeking additional jurisdictional diversification.

• Inflation and Wage Realities: CPI inflation remains stubborn at 2.7%, and while government officials promise to "get prices down," inflation actually means prices continue to rise, just at a slower rate.

• Tactical Alternative Sleeve: A new tactical sleeve was introduced in 2024, including limited exposure to IBIT (Bitcoin), Berkshire Hathaway (as a defensive stabilizer), NVIDIA, and Alphabet.

• Relocation and Residency Planning: Due to changing domestic conditions, the firm has seen an increase in client interest in evaluating financial plans for relocation, alternative residency, or international citizenship.

• NCM360 Innovation: New Capital continues to build proprietary technology, including automated tax reminders and cash flow modeling, to help clients stay organized in an increasingly volatile world.