Where the investment signals lie amid a plethora of noise

The incoming Trump administration has raised uncertainty about the outlook for global markets in 2025, particularly around the implementation of Trump’s protectionist policies, according to a few of our boutique fund managers, Canopy Investors, 4D Infrastructure and Quay Global Investors. In this wire, we'll ask these leading money managers where they see markets going next year and the key themes that will likely impact investment in these key asset classes.

The second Trump administration creates opportunities and risks

The new US administration’s activities and policy changes will be very important in driving market sentiment in 2025 and will create both opportunities and risks, according to Canopy Investors’ portfolio manager, Kris Webster. 

“There remains significant uncertainty about the actual policies that will be introduced, and their ultimate impact, making the outlook for 2025 very uncertain.

“However, based on Trump’s stated policy positions, several domestic US sectors appear well positioned to benefit from his presidency. These include manufacturers, energy companies, and industries targeted for deregulation, for example, financials.

“Conversely, certain sectors may face headwinds including global exporters to the US, US importers, and companies with substantial China exposure.

“Markets have already priced in some of these policy expectations, as evidenced by US dollar strength against major currencies. This dynamic has created increasingly attractive valuations for many high-quality stocks in markets outside the US, particularly those with limited exposure to US policy changes.

He says a critical uncertainty centres on how these policies might affect inflation and, by extension, interest rates – both of which significantly influence asset prices and highly leveraged companies.

“It’s possible the US government will moderate its policies around taxation, tariffs, and immigration if inflation picks up again.

“While we don’t make short-term macro or market predictions, it is likely that the policy uncertainty anticipated in 2025 will drive increased market volatility. This environment should create opportunities for active investing, particularly in global small and mid-cap companies, where market inefficiencies tend to be more pronounced,” he says.

Heightened noise to create a challenging short-term outlook

For global listed infrastructure, there is likely to be heightened policy noise in the US on what policies are prioritised for actual implementation, according to 4D Infrastructure CIO, Sarah Shaw. 

“Most notably, these include the 60% tariff on Chinese goods and a universal 10-20% tariff on all other countries. These could have an impact on infrastructure assets, in particular port and rail volumes in both export and import countries, with some volumes pulled forward ahead of the anticipated tariff increases, whilst some export markets will be substituted with other destination markets away from the US.

“Trump is also looking to repeal some aspects of the Inflation Reduction Act (IRA), which may impact the growth outlook of some heavily US renewable-focused developers and utilities. This could lead to an ongoing overhang till we see what is exactly implemented.

“This pivot away from renewables and preferring traditional fossil fuels may be positive for North American pipelines if more federal lands are permitted for exploration. An undoing of Biden’s pause of new LNG Export terminals will also help the long-term capital plans of those businesses,” she says.

“Lastly, the proposed policies are inflationary and a reversal in the trend of interest rates could be a headwind for US nominal rate utilities which have had an incredibly strong year in 2024”

Elsewhere in the world, there are divergent economic outlooks.

“In Europe, demand remains soft with interest rate trajectory down. China continues to struggle with a dormant economic outlook, and increasing stimulus. In Brazil, growth continues to surprise to the upside with a reversal in the interest rate trajectory.”

Finally, she says that this macro uncertainty and geopolitical tensions will create volatility and noise. But, separating the attractive fundamentals of infrastructure from this noise and continuing to invest against the inefficiency of markets, will allow investors to capture future earnings and growth in this asset class.

“Infrastructure offers a unique combination of defensive characteristics and earnings resilience but with significant long-term growth thematics as well as an ability to capture economic cycles.

“The need for global infrastructure investment over the coming decades is clear with five globally relevant and necessary thematics underpinning a multi-decade growth story. With governments unable to wholly fund the infrastructure needed, there’s a significant opportunity for private investors to tap into this growth story. We can think of no more compelling or enduring global investment theme for the coming 50 years,” says Ms Shaw.

Look globally for opportunities in real estate

Chris Bedingfield, portfolio manager at Quay Global Investors, sees a similar mixed story for global real estate assets.

“Investors continue to make the mistake of thinking real estate is interest rate driven but the value in real estate can be found by focusing on thematics not influenced by macro factors or politics.

“The ageing population is a theme we are focused on and 2025 marks the 80-year anniversary of the end of the Second World War, meaning that next year, the first of the Baby Boomers will turn 80, an age where many turn to some type of assisted living.

“Retail also continues to look very attractive. The recovery of in-store retail sales since COVID remains well above the prior pandemic trend. We expect good financial results from the best malls in 2025 as landlords continue to mark rents back to economic reality.”

Chris says some signs suggest a positive outlook for global REITs.

“Timing the markets is hard. Missing a few good days and long-term total returns can alter significantly. This is especially so for listed real estate.

“History suggests listed REITs run in anticipation of US Fed rate cuts and continue to perform for some time after, and we’ve seen this materialise after the first rate cut in September.

“Moreover, higher building costs are already resulting in a shortage of global real estate, as the development equation does not work. This will simply squeeze future tenants, all the more to the benefit of landlords and investors of REITs,” he says.

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