2025 Summer Leadership Series – Global Monetary Policy Divergence Reshapes Allocation Strategies 

In the third installment of Connect Money’s 2025 Leadership Series, investment leaders share how widening gaps between U.S. monetary policy and other developed market central banks are influencing global portfolio positioning—and where they see signs of market overextension. 

Read further for insights from John Swift, Managing Director, Head of Wealth Management, Rockfleet Financial Services Inc.; Jake Heidkamp, Principal, Co-President, FactRight; Garett Bjorkman, CEO, PEG; and Derek Schug, Head of Portfolio Management at Kestra Investment Management. 

How does the growing divergence between U.S. monetary policy and other major central banks shape your global asset allocation views?   

John Swift, Managing Director, Head of Wealth Management, Rockfleet Financial Services Inc.: This monetary policy divergence represents the most significant shift in global capital flow dynamics we’ve experienced in over a decade, creating both currency volatility and cross-border investment dislocations that require careful navigation.  

John Swift

Based on our market perspective, this divergence serves as a critical reminder that effective global diversification extends beyond simple geographic distribution—it requires deliberate policy regime diversification. Different central banks responding to distinct inflation pressures and growth trajectories creates opportunities for those positioned appropriately.  

We favor selective increases in non-dollar denominated assets, particularly in regions where central banks have demonstrated greater policy discipline and are further advanced in their inflation management cycles. However, we look for opportunities through currency-hedged vehicles and active management strategies capable of navigating local market complexities.  

For wealth management clients, this divergence is creating compelling cross-border arbitrage opportunities, particularly in European fund secondaries where pricing dislocations reflect both policy uncertainty and currency considerations. We think the era of passive global allocation may be ending—active currency and policy regime awareness seems to be becoming essential for portfolio construction. 

Jake Heidkamp, Principal, Co-President, FactRight: N/A we don’t allocate capital directly into funds. However broader longer-term implications and the prospect of capital controls and prospective capital repatriation from foreign investors in U.S. markets does have us thinking longer term on pricing dynamics and which sectors would most likely be impacted by such developments, from what we understand any such effects would likely be in the large/mega cap space given the liquidity in those markets.  

Jake Heidkamp

A few managers we work with are beginning to explore more emerging market and international opportunity sets which is a notable shift from our historical fund coverage with these same managers.   

Are there areas of the market where you see signs of excess optimism, positioning, or froth?   

Garett Bjorkman

Garett Bjorkman, CEO, PEG: Broadly, the market has not returned to a state of froth. If anything, the pendulum has swung toward caution. However, we do see some excess optimism in niche segments, such as economy extended-stay hospitality, where a surge in supply has outpaced demand and financing appetite. At PEG, we remain focused on segments with durable demand and constrained future supply—notably multifamily and select-service hospitality.  

There is still considerable dry powder waiting to be deployed, and as seller pricing expectations begin to reconcile with capital market realities, we expect transaction volume to increase. We’re preparing for this next wave of investment with discipline and clarity, not exuberance. 

Derek Schug, Head of Portfolio Management at Kestra Investment Management: While AI is clearly having a significant impact on the economy and will have a positive influence on productivity over time, we are seeing high valuations that, in many cases, extrapolate significant earnings growth for a very long time into the future. The most expensive stocks have had really strong top and bottom-line results for several years, which can justify a good chunk of their outperformance in recent years.   

Derek Schug

But the positive rhetoric around AI, which has now expanded to utility or power companies that will supply the increase in energy demand needed to support AI computing, has become so pervasive that expressing skepticism about these growth rates being sustainable as far as the eye can see is currently a risky view to articulate.   

While AI is perhaps the most notable concept causing froth, we could also argue that cryptocurrency and gold are two other notable areas whose recent gains indicate some potential froth. Importantly, though, this doesn’t mean you should not own these securities nor even take short positions in them, but from a risk management standpoint, underweighting frothy areas is something that often makes you look dumb in the short-term but can pay significant benefits over the long-term. 

Please visit the Insider page for our latest 2025 Summer Leadership series articles. 

Important Disclosures: Views expressed represent opinions of John Swift, Managing Director at Rockfleet Financial Services, Inc., are subject to change, and for educational purposes only. Rockfleet Financial Services, Inc. does not provide legal or tax advice; consult appropriate advisors. Municipal bonds involve risks including possible loss of principal, interest rate sensitivity, and liquidity challenges. Income may be subject to federal, state, local taxes, and AMT. Information on municipal securities available at emma.msrb.org. Rockfleet Financial Services, Inc. may receive compensation for municipal securities transactions, creating potential conflicts. Past performance does not guarantee future results.