Schroders chief investment officer (CIO), Johanna Kyrklund, and Nils Rode, CIO for private markets at Schroders Capital, identify investment opportunities in 2025 at Schroders Crystal Ball 2025 Investment Outlook event.

Although many wealth managers have come out in favor recently of investing in US tech firms in 2025, Johanna Kyrklund at UK-based investment manager Schroders believe that investors may need to look elsewhere to achieve their 2025 return objectives.

“We think there are return opportunities to be had, even after the gains of 2024. But investors may need to look beyond recent winners,” Kyrklund said. “Equity investors have grown used to a small number of large companies powering the stock market’s gains. But that pattern was already changing during 2024 and we think there is potential for markets to broaden out further.” 

She highlighted how the "Magnificent 7” – Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta Platforms and Tesla – were a story for 2023 and reached a peak in 2024. And although there could be potential to rise further and earnings are still strong, Kyrklund believes that it’s good to move away from US mega caps. “Different sectors and different regions may start to appear more attractive. US utilities, for instance, are attractive,” she said at the event.  â€śAn active approach will be needed to avoid over exposure to previous top performers, and to capture new return opportunities as they emerge.” 

“Equity market valuations do not look expensive outside the US,” she added. "And an environment of positive growth and lower interest rates should benefit corporate earnings, which is what drives shares over the long term." Kyrklund favors a global approach to equities.

However, many wealth managers have come out in favor of US equities recently as their most preferred market. UBS Global Wealth Management is overweight in US equities and thinks that artificial intelligence will play out in 2025. It favors US tech firms, utilities and the financial sector. Goldman Sachs Asset Management and Pictet Asset Management have also singled out US equities as their preferred option. See more here and here.

Meanwhile, Kyrklund views bonds favorably for the old-fashioned reason of income generation, the importance of portfolio diversification in terms of ensuring resilience amid ongoing geopolitical uncertainties and the significance of decarbonization as a key investment theme. “Yields are still good and they still play a role,” Kyrklund said. “Gold is also attractive and a good store of value.”  Goldman Sachs Asset Management is also positive on bonds in 2025.

Nils Rode anticipates that 2025 will be an attractive environment for new private market investments, offering potential for both return and income generation as several cycles align favorably. These include the private market fundraising, technological disruption and economic cycles.

“Simultaneously, considering ongoing geopolitical tensions and the elevated risks of escalating conflicts, the role of private markets in providing portfolio resilience remains crucial,” he said. “Despite political changes in the US, we expect the trend toward decarbonization to persist, with private market investments playing a significant role in driving the global energy transition.” 

Rode pointed to the small/mid-buyout and venture capital space as being the most attractive in private equity, with real estate also expected to enjoy a good vintage year, while the private debt premium remains attractive across several strategies.