Weekend Edition: 2025: Less growth, but still lots of opportunity
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Where should I invest my money in 2025 given high uncertainty?
So where do you invest your money in 2025? A year of high uncertainty with an unpredictable president, a lingering inflation outlook, continuing wars and geopolitical risk and the dominance of a small number of large tech players and the whole AI thing as well. Let's navigate our way through it all.
The Morning Call from NAB with Phil Dobby. So
it's already shaping up to be quite a year, thanks in large part to Donald Trump, but also that pesky, persistent inflation. We've got American exceptionalism and all that that entails, including AI, that some people think is the next big thing. Others think, well, maybe it's a bit overblown. And then we've got equity markets, which have been charging ahead last year, but that can't continue, can it? Well, let's look at all of this and get some investment themes for this year. Let's welcome back Kylie Wilmont. She's Chief Investment Officer at Mercer based in Sydney. Maybe we should kick off, Kylie, by looking at equities in the U.S. Listed companies on the U.S. Stock Exchange had equities. An amazing year last year.
Is that a reason to steer clear of them this year, particularly with all this global uncertainty? Or are they, here's the billion-dollar question, are they just going to have another fantastic year this year?
Yeah, start with the small questions, Phil, and it's great to be back and hi to all of your listeners. Look, I think the short answer is we're not extrapolating those supersized returns that we've seen over the last couple of years actually forward. We do, though, generally think that markets can continue to generate returns. Pretty decent returns, but we're going to see higher levels of volatility and probably more dispersion. You've mentioned the U.S. exceptionalism. I know it's been well discussed on this podcast, as has that very high levels of market concentration that have formed up in the U.S. equity market really fueled by that. a high mag seven rally. But it is a US phenomenon. And for us, we invest across the whole global equity market, of course.
And so I think while our base case is to get some reasonable returns from equities, I think there are reasons to be cautious because there's risks actually both to the upside and the downside. And they're probably a bit wider as we look at them from here. On the upside, you've got potential earnings being supported by the enhancements that are coming through from AI. You've got potential tax cuts and deregulation from the Trump administration. But on the downside, of course, and it's playing out before our eyes, we've got the geopolitics and the trade war concerns and a huge amount of uncertainty around that. So I think while we came into the year broadly neutral on equities, and a lot of that was because we just thought it's a very uncertain outlook, and sometimes the best thing that you can do as a long-term investor when there's uncertainty is just stick to your strategic allocations, and we thought that that was the best place to be.
Will U.S. equities still deliver strong returns after last year’s rally?
But I think these events of the last week or so, they probably skewed that risk to the downside a bit.
Even when it comes to the Magnificent Seven?
Yeah, I think you put a couple of things together, actually. One is obviously the concerns about the tariffs and trade war that I think will weigh on markets. And even though we don't know at this point what that's going to end up looking like, it's likely to play out for a while. And then when you add into that the potential broadening out of that AI thematic, post the deep seek announcement of a couple of weeks ago, that potentially reduces that leading market position that the US large cap companies have had. I think that just means we're feeling perhaps slightly more cautious when you put those two things together than we perhaps were coming into the year. So we are considering a modest dynamic position that's underway at
equities as we navigate through what I think is going to be a period of uncertainty and probably...
But it's interesting, isn't it? Because we had that reaction to deep seek and then markets seemed to bounce back again as though it was just a fly in the ointment that had swam away.
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Chapters
8 chapters
1
Where should I invest my money in 2025 given high uncertainty?
0:01–3:02
2
Will U.S. equities still deliver strong returns after last year’s rally?
3:02–6:58
3
Can we expect another 14% super‑fund return this year or should expectations be lowered?
6:58–10:19
4
What opportunities exist in the property market amid the current downturn?
10:19–13:43
5
Is Japan’s economy a growth engine for 2025 and why?
13:43–16:50
6
How can diversification across fixed income, equities and private assets improve portfolio resilience?
16:50–21:41
7
How does prolonged inflation affect the balance of my investment portfolio this year?
21:41–25:02
8
When market volatility spikes, should I adjust positions or stay the course?
25:02–28:00