‘The potential for a Liz Truss moment’ This Wall Street expert says these are the biggest risks for investors in 2025 — here’s how to make sure your portfolio thrives

In an interview with the Wall Street Journal, the head of Swiss Re’s life and health reinsurance arm, Paul Murray, estimated that President-elect Trump would increase the federal deficit by 7-12% of GDP. Federal Reserve Chair Jerome Powell described Trump’s borrowing plans as “unsustainable.”

“We are finally hitting a breaking point,” warned Invesco's Chief Global Market Strategist, Kristina Hooper, during an interview with Bloomberg in November.

Hooper was referring to the rising volatility rattling global stock markets. She explained that we might soon face another “Liz Truss moment,” suggesting we are on the verge of even more market instability — just like what happened during the former UK Prime Minister's brief tenure. When Truss announced major tax cuts, markets went into a tizzy, driving the UK's currency down to record lows.

However, there are reasons to stay optimistic: precautionary measures can help investors stay prepared and protected into 2025.

The argument for diversification

During her Bloomberg interview, Hooper’s main tip for investors was to diversify. But how do you know when you're diversified enough?

According to JP Morgan: "A widely accepted rule of thumb claims that a properly diversified portfolio must have no more than 10 to 20 percent of total investment assets in a particular stock".

Beyond making sure you aren't exclusively invested in a single stock, you also may wish to consider you're invested beyond a single asset class.

For instance, when the stock market falls, real estate prices may still hold steady. Holding assets across multiple asset classes provides you with a cushion if one begins to fall.

First National Realty Partners (FNRP) allows accredited investors to diversify their portfolio through grocery-anchored commercial properties, without taking on the responsibilities of being a landlord.

With a minimum investment of $50,000, investors can own a share of properties leased by national brands like Whole Foods, Kroger and Walmart, which provide essential goods to their communities. Thanks to Triple Net (NNN) leases, accredited investors are able to invest in these properties without worrying about tenant costs cutting into their potential returns.

Simply answer a few questions – including how much you would like to invest – to start browsing their full list of available properties.

However, owning a share of a project or property this way holds some risk — for instance, you could receive no returns and these assets are often illiquid. Speak to a professional if this investment is right for you, especially if you are retired or close to retirement.

“Lack of fiscal prudence”

Hooper also explained to Bloomberg, “We're seeing countries struggle with fiscal prudence, and that will have ripple effects for investors.”

If the trickle-down effect of rising debt were to indeed hit American investors, then it would be helpful to audit your personal finances — ensuring your investing and spending habits are aligned with your financial goals.

The average American spends $273 monthly on subscriptions alone, according to a study by West Monroe. Tools like Rocket Money can help you regain control of your spending.

Their platform categorizes your monthly expenses and shows your cash, credit and investment balances all in one place. The app will also check to make sure you’re not wasting money on any subscriptions you may have forgotten about, potentially saving you hundreds of dollars a year.

By trimming unnecessary expenses, you can redirect funds into investments that better align with your financial goals for 2025.

You can also make sure that you're making the most of your current spending. When you make a purchase on your credit or debit card, Acorns automatically rounds up the price to the nearest dollar and places the excess into a smart investment portfolio.

Right now, when you sign up for Acorns, you can get a bonus $20 bonus investment to start growing your savings.

Watch out for “yellow flags”

And although many large companies' stocks have seen a robust recovery, Hooper warns we shouldn't get our hopes up. “There are yellow flags in the stock market that suggest we’re not out of the woods yet,” she said on Bloomberg.

Elevated valuations and overreliance on tech stocks have heightened risks for traditional stock portfolios.

Platforms like Masterworks is a unique and innovative ways to diversify beyond the potential tech bubble.

Masterworks enables access to blue-chip art investments, a class historically resilient to market downturns. And it’s a strategy adopted by wealthy investors, with 83% of wealthy Americans under 43 already collecting art or wanting to.

Normally, only the top 1% of investors would be able to diversify with art like Picassos and Banksys. But with Masterworks, you can easily diversify into this asset class without needing millions or art expertise.

With a team that’s been working since 2019, Masterworks investors have realized representative annualized net returns like +17.6%, +17.8%, and +21.5% (among assets held for longer than one year)

Then there's gold, which is traditionally considered a safer investment during times of stock market volatility.

Opting for a gold IRA gives you the opportunity to hedge against market volatility by allowing you to invest directly in physical precious metals rather than stocks and bonds.