Investing.com — In a Monday note to clients, Wells Fargo (NYSE:) The Investment Institute outlines its top five portfolio strategies for 2025, focusing on areas poised to benefit from economic growth, liquidity, and emerging trends like artificial intelligence (AI).

1)’Be prepared for abundant liquidity to expand opportunities:’ Wells Fargo expects liquidity from government spending, Federal Reserve rate cuts, and increased bank lending to drive consumer and corporate investment.

“That expected spending with cash on the sidelines favors a full allocation to equities, in our view,” Wells Fargo said in the report.

Communication Services and Specialist Retail are highlighted as the main beneficiaries of consumer spending, while the Industry and Energy sectors stand to gain from corporate investments.

The report also said that bank reserves, although lower than at high levels, remain “substantial” and should support credit growth.

is seen favorably due to net-interest margin improvement and potential regulatory relief, while defensive sectors such as Consumer Staples and Utilities may underperform in the near term.

2)’Position for a cyclical recovery but remains tilted towards US assets:’ Wells Fargo expects stronger economic growth to drive a global recovery centered on the U.S. The company advises investing in “economic sensitives like small caps” and staying prepared to expand these positions as the economy improves.

Meanwhile, assets such as major US stocks and commodities could benefit from increased global demand.

3)’Rethink the return on investment: ‘ As the Federal Reserve lowers interest rates, Wells Fargo predicts that short-term yields will decline, while longer-term yields may rise.

Investors should also consider dividend-paying equities, the firm said, noting that “more than $2.4 trillion on their balance sheets” positions US large-cap companies to continue increasing payouts. of the dividend.

4)’Consider expanding AI opportunities: ‘ As AI investments drive rallies in semiconductors and cloud services, Wells Fargo expects a slowdown in direct AI spending as investors focus on profits.

“We believe that investors can benefit from the AI ​​theme through the Energy and Communication Services sectors and the Interactive Media & Services sub-sectors, where some tangible efficiencies are starting to materialize.”

These sectors show more attractive valuations than the big names in technology, which is recommended by the weight of the market. The next phase of AI will test its ability to “enhance real productivity” and may spur more revenue growth and capital spending.

5)’Keep extreme risks in perspective:’ Wells Fargo warned of “two hot wars, a US leadership transition, and more widespread global political change” in 2025, suggesting increased event risks.

Instead of moving to cash, the company advises hedging through commodities such as energy and gold, as well as alternative investments such as hedge funds. These strategies can “potentially provide relatively attractive returns in different market environments.”