Picks and Pans and Wait-and-Sees: A Look Back at 2025
The U.S. financial system showed once again this year why it is the eighth wonder of the world. Despite heightened geopolitical uncertainty brought on by the end of globalization (think “Liberation Day”) and the birth of a new multipolar international order, mainstream finance demonstrated remarkable resilience – and even showcased a capacity for innovation, absorbing would-be digital asset disruptors like stablecoins and tokenization and integrating AI across the board. Throw in a sea change in financial regulatory policy, and 2025 may go down as one of the most consequential years since the Great Financial Crisis.
Consensus highlights for 2025 would include:
- A highly concentrated bull market in U.S. stocks
- Elevated valuations
- Fears over an AI bubble
- Tariffs and their resulting policy uncertainty
- “Cockroaches” in the private credit market
- Three rate cuts on the path to further easing
- Stimulative tax benefits courtesy of the One Big Beautiful Bill
Plenty went right in 2025, but not everything. Here are my out-of-consensus “picks and pans”:
Picks
An About-Face in Financial Regulation
The shift from the Obama–Biden approach to financial regulation to Trump’s was dramatic, particularly at the SEC. In replacing uber-regulator Gary Gensler, recently appointed Chair Paul Atkins ushered in a new era of innovation-friendly rulemaking and sent a number of pending regulations to the trash bin. Digital assets benefited the most: Congress advanced the GENIUS Act to legitimize stablecoins and proposed the CLARITY Act to better define the roles of the SEC and CFTC when it comes to the oversight of digital assets.
The Democratization of Private Alternative Investments
Venture capital, private equity, private credit and real assets – once reserved for institutional asset owners and investment professionals (think David Swensen and the Yale endowment model) – have worked their way down through family offices to high-net-worth investors. They can now even be found in affluent individuals’ retirement accounts, thanks to permissive regulatory changes by the Trump administration. This trend – which still has a long way to run – offers a broader range of higher return options and opportunities to individual investors ... with, of course, attendant risks that may not be suitable for all investors.
Pans
The Consolidation of Wealth Managers
The frenzied acquisition of registered investment advisors by private equity-backed consolidators is a train wreck waiting to happen. Billed as a win-win-win for financial advisors with succession and monetization challenges, it is the wealth management version of the traditional private equity roll-up playbook – and is all about short-term financial engineering that has little to do with serving individual clients over the long term. The failed sale of Edelman Financial Engines may signal that cracks are starting to appear in the model – cracks that will only grow larger with the next market downturn.
The Unsustainable Growth of the U.S. National Debt
So much has been written about the unsustainable growth of U.S. public indebtedness, and yet we continue our societal “March of Folly” toward fiscal Armageddon. There are three ways out – inflation, default and robust economic growth – and growth will succeed only if GDP growth exceeds the rate of growth in public debt. Meanwhile, the insolvency of Social Security looms on the horizon – something that can be forestalled with relatively minor changes to benefits and funding, if our elected officials had the courage to act.
Wait-and-See
The Mainstreaming of Digital Assets
Stablecoins, crypto currencies and even tokenized assets continued to find their way into the traditional financial system in 2025. It won’t be long before investors of all shapes and sizes, from institutions to individuals, will demand the ability to move between mainstream platforms and blockchain rails. Will this enhance the ability for finance to help real people in the real world solve real problems and achieve real goals? All we can do is wait and see.
In the meantime, I wish you happy holidays and a prosperous 2026.
The information reflected on this page are Baird expert opinions today and are subject to change. The information provided here has not taken into consideration the investment goals or needs of any specific investor and investors should not make any investment decisions based solely on this information. Past performance is not a guarantee of future results. All investments have some level of risk, and investors have different time horizons, goals and risk tolerances, so speak to your Baird Financial Advisor before taking action. The views and opinions expressed here are those of the speaker and do not necessarily reflect the views or positions of the firm.