Your parents’ investing strategy is broken. Here’s what to do instead

• The 30-year era of falling rates and low inflation is over. Bonds are offering decent income again, but investors might need an explicit inflation hedge – not just a mix of stocks and bonds
• AI profits are set to spread from tech giants to a range of industries over the next decade, creating opportunities for active managers
• The US dollar’s expected to fall by 10% over the next decade, compared to its rivals. For Americans, that may make international diversification essential. And for everyone else, it could add to the allure of currency-hedged investments – at least whenever American assets are involved.

JP Morgan Asset Management just dropped its forward-looking Long-Term Capital Market Assumptions – and its message was urgent: the strategies that powered the past three decades of steady returns just aren’t going to cut it anymore. That era of cheap money, low inflation, and passive wins has given way to something messier and more demanding. And investors are about to meet their hardest test in a generation.

Here are nine fundamental shifts happening across markets, and what you need to do about them.

1) The era of cheap everything is over

For 30 years, falling interest rates made borrowing cheap and pushed up the value of almost everything – stocks, bonds, real estate, and more. But that party’s ending. Government debt is piling up across the developed world, and investors are demanding higher returns to cover the risk that creates. The silver lining is that bonds are finally paying decent yields again – JP Morgan expects intermediate, 2- to 10-year Treasury bonds to return 4.6% annually, their best outlook since the financial crisis.

*Here’s what this means for you**.* If you’ve been ignoring bonds, it’s time to take another look. They’re offering real income again. Just don’t expect to see the kind of price gains that made bonds so popular over the past 30 years. Think of these assets as your portfolio’s steady earner, not its growth engine.

2) Inflation isn’t going back in its box

The days of low inflation are over. A cocktail of trade wars, worker shortages, and government spending means prices are volatile and will probably stay that way. That changes everything about how portfolios work. In the old world, when stocks fell, bonds usually rallied, cushioning the blow for investors. But when inflation is the problem, both stocks and bonds can fall hand-in-hand. That's why JP Morgan is warning investors to hedge against two types of trouble: economic slowdowns and inflation flare-ups.

Here’s what this means for you. Don’t rely on a simple stock-and-bond mix like the classic 60/40 portfolio to protect you. Add some tried-and-true inflation fighters to your blend: Treasury inflation-protected securities, or TIPS (*for American investors), commodities, and real assets like real estate and infrastructure tend to hold their value when consumer prices rise.

3) Politicians are running the show now (and that’s not necessarily good)

Markets used to follow their own rhythm – boom, bust, recovery, repeat. Now, politicians and central banks jump in at the first sign of trouble, propping things up with stimulus packages and interest rate cuts. That sounds great, and it does mean recessions are shorter and sharper. But every rescue mission adds to government debt, and eventually that bill comes due. What’s more, JP Morgan’s warning that central bank independence is on the wane, and political considerations might increasingly influence interest rate decisions.

Here’s what this means for you. Pay attention to elections and central bank announcements – they’ll move markets more than your usual economic updates. And stay flexible. The days of “set it and forget it” portfolios are fading. You’ll need to shuffle your investments as policies shift – which might happen a lot more often than you think.

4) Globalisation is reversing (but don’t panic)

Trade is becoming more local. Countries are putting up new barriers, restricting immigration, and bringing manufacturing back home. That’s chipping away at efficiencies and weighing on growth. But here’s the thing: it’s also forcing companies to invest heavily in technology to make up for worker shortages. And it’s pushing countries like Germany, Japan, and China to spend more to stimulate their own domestic economies rather than relying on exports. So the gap between the American economy’s growth and everyone else’s is narrowing.

Here’s what this means for you. The US won’t dominate global growth forever. But that’s not doom and gloom – it’s opportunity. Look beyond America’s borders for investments – and not just as a way of managing risk and diversifying your holdings. It’s now where you might find the best returns.

5) Private markets are going mainstream

Used to be that private equity, venture capital, and private credit were the exclusive playground of ultra-wealthy families and big institutions. They offered generous returns to deep-pocketed investors who could afford to have their money locked up for long periods. But now, ETFs are opening these markets to regular folk, and blockchain technology is inviting individual portfolio holders to trade stakes in private companies as easily as they buy and sell stocks. As more money pours in, the fat returns that used to come with these walled-off markets are shrinking. It's still a good place to put some money, but you need to be picky.

Here’s what this means for you. Private market access may be coming your way, but don’t assume it’s better than public stocks. The advantage is dwindling as more people pile in. If you do invest, focus on funds with excellent track records. In private markets, the gap between the best managers and the average ones is huge.

6) AI is about to spread beyond Big Tech

Right now, a handful of tech giants – think Microsoft Corp (NASDAQ:MSFT), NVIDIA Corp (NASDAQ:NVDA), Alphabet Inc Class A (NASDAQ:GOOGL) (Google) – are making the tools everyone needs and winning the AI race. But over the next decade, the spotlight will shift. AI’s getting baked into every industry, helping firms cut costs, boost productivity, and find new revenue streams. So profits won't be quite as concentrated in tech stocks anymore. So it’s going to make more sense to diversify your stock holdings and your overall portfolio. After all, the old asset-mix wisdom isn’t working as well as it once did – a mix of stocks and bonds used to reduce your risk by 35%; now it only cuts it by 15%. It’s time to cast a wider net.

Here’s what this means for you. Keep your tech bets, but don’t put all your eggs in that basket. AI returns will stretch across sectors. And diversify beyond just stocks and bonds – add real assets like real estate or infrastructure funds that can weather different market conditions. I’ve written about how to play the industrial backbone of AI, and you can read about that here.

7) Your currency exposure just got way more important

The US dollar has been king for decades, but it’s been gradually losing its crown. JP Morgan expects the greenback to fall about 10% against its rivals over the next decade as investment opportunities spread around the globe. For Americans, it actually makes international investments more attractive (as foreign currencies strengthen, your returns will rise). For everyone else, it means thinking carefully about whether to hedge your US dollar exposure.

Here’s what this means for you. If you’re a US investor, consider embracing international stocks and bonds. A weakening dollar will boost the returns you’ll get. If you’re outside the US, talk to an adviser about currency hedging – it’s not automatic anymore. When investing in American markets, look for currency-hedged ETFs that can protect you from the risk that future dollar weakness will eat into your gains. Either way, don’t ignore the foreign exchange factors: they may matter a lot more in the years to come.

8) The stock pickers are headed for a comeback

For years, passive index funds crushed active managers. Investors figured: why pay someone to pick stocks for you when you could just buy the whole market on the cheap? But, yep, things are changing. AI’s shaking up industries and creating new winners and losers, and government and central bank policies are increasing market volatility. And that’s giving skilled active managers more room to add value. JP Morgan has increased its return forecasts for hedge funds by up to 0.7 percentage points, and says the gap between good and great private market managers is already widening.

Here’s what this means for you. Passive investing still has its place – especially for core holdings. But consider allocating some of your portfolio to active strategies that can capitalize on volatility and spot trends before the crowd does. Just make sure you're picking managers with real track records, not just good marketing.

9) The biggest wealth transfer in history is happening right now

Baby boomers are set to pass trillions of dollars to their heirs over the next decade. And those younger investors think about money differently. They’re more comfortable with crypto, interested in values-based investing (ESG), and willing to mix rock-solid investments with speculative bets on things like meme stocks and thematic funds. This generational hand-off is going to fundamentally alter where money flows and which assets become popular.

Here’s what this means for you. If you’re inheriting wealth, don’t feel pressured to invest exactly like your parents did – but don’t throw out time-tested principles like diversification either. If you’re transferring wealth, have honest conversations with the next generation about their goals. And no matter where you fall, watch where the younger money is flowing. Those trends could define the next decade of investing.

Theodora Lee Jospeh is an analyst at finimize.

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