Market commentary: Jan 2025
Investment performance
Investment performance was strong over the last 6 months. International shares led the way with double digit returns. The main driver was the US share market. Huge excitement and growth expectations for companies developing Artificial Intelligence (AI) is driving prices higher and higher. For sure AI is transformational and will play out over the next few decades. A more immediate global influence – and concern – is Donald Trump and the impact of his so called “America first” actions.
2025 will be an exciting year!
Investment themes for the next 10 years
From an investment return perspective, being on the right side of trends has been very rewarding. So, what then can we expect to dominate over the next ten years and beyond? The team at Capital New Perspective Fund have identified 5 trends:
Increasingly powerful computers and artificial intelligence (AI): There are four parts to this theme. Computer power (semiconductors, or the ‘brains of AI’), infrastructure (data centres to hold enormous amounts of data), AI model developers, and the real life and end-industry users who benefit from AI. Given its pervasiveness across the economy, the ultimate addressable market for AI is potentially limitless.
The genetic era of health care innovation: Breakthroughs in genomic sequencing and data processing are allowing drug companies to research, develop, and apply specific and precise interventions for illnesses. For example, obesity, cancer, cognitive impairment and pain. What’s exciting is that this trend coincides with another transformational shift – AI.
Industrial renaissance: In recent years investors have focused on ‘growth’ companies - especially those in the new digital age – and have largely ignored ‘old economy’ companies that make physical things. Signs are emerging that industrial businesses that make things may return to favour. Companies at the forefront of energy transition, energy security, building of data centres, rising defence spending are possibilities.
Enabling the energy transition to renewables: This could transform manufacturing and the broader economy. Unlike coal or natural gas, the fuel costs of renewable energy are virtually zero and once the infrastructure is built there are only small maintenance costs. Power costs could collapse providing manufacturers with major competitive advantages.
Reconfiguration of global supply chains: Due to recent geopolitical tensions and supply disruptions manufacturers are moving to improve the resilience of their supply chains by rebuilding production closer to home and end markets. An example is Taiwan building semi-conductor manufacturing in the US.
The team at Capital New Perspective Fund say that the next decade and beyond could present a rich and diverse set of investment opportunities for global equity investors. They are developing investment strategies that can navigate significant market shifts, while keeping true to their objectives and philosophy.
Richard Grimes, CERTIFIED FINANCIAL PLANNER (CFPCM), Director and Financial Adviser