Ninety One, an Anglo-South African asset manager, and Luxembourg headquartered multi-asset manager Candriam, a subsidiary of New York Life, discuss the outlook and investment opportunities in 2025.

With the US performing strongly and China showing signs of turning a corner, a global economic recovery is building, and Ninety One and Candriam believe that there are investment opportunities to be had in 2025, particularly in the US and emerging market equities.

“Our allocation remains positive on equities relative to bonds,” Nadège Dufossé, global head of multi-assets at Candriam, said in a note. “We remain overweight in US equities. Although the US market's performance and valuation already incorporate a certain level of optimism following US president Donald Trump's victory, the growth trajectory of the US economy and corporate profits is much stronger and more resilient than that of other developed countries,” she added. “We are, however, more favourable towards small-and medium-sized companies, cyclical sectors such as industrials, and financials, which should benefit most from Donald Trump's ‘reflationary’ and domestically favourable policies,” Dufossé said. “We remain neutral on tech stocks, where valuations leave little room for new positive surprises despite a strong earnings momentum. In this sector, we prefer software and services over semiconductors.” 

Philip Saunders, director, and Sahil Mahtani, head of macro research for the Ninety One Investment Institute, also favour US sectors such as financials and small-cap stocks. They highlighted how the US is expected to deliver above-trend growth in 2025, despite significant hurdles, including high government debt at 126 per cent of GDP and unsustainable fiscal spending at 6.4 per cent of GDP. The new Trump administration’s pro-business policies could also impact growth positively.

However, Saunders and Mahtani believe that investors should look beyond last year’s winners in a more challenging year for US large-cap stocks. While US macro prospects look promising, much of the positive news may already be priced in, suggesting 2025 could be more challenging for large-cap US equities. As global conditions improve, they think investors should consider trimming allocations to large-cap growth stocks. “Opportunities exist in sectors like financials, which offer momentum and reasonable valuations, and in value and small-cap stocks, which provide diversification and exposure to broader earnings growth,” Saunders said.

Other wealth managers, such as Standard Chartered, Northern Trust Asset Management, UBS Global Wealth Management, Pictet Asset Management and Goldman Sachs Asset Management also favour US equities in 2025. See more commentary here and here.

European equities
Like Standard Chartered, Candriam is underweight in European equities, saying they offer limited earnings growth prospects. Investor scepticism is very strong towards the region. “The gap in investment and productivity gains relative to the US continues to widen, and the political situation in France and Germany is mired in partisan divisions,” Dufossé said. “Attractive valuation levels alone will not suffice to bring investors back. Europe will need to demonstrate better growth prospects, Germany will need to relax its ‘debt brake’, and trade tensions with the US will need to be successfully managed, which is possible, but far from certain.”

Emerging market equities
Outside the US, Dufossé’s preference leans towards emerging markets, which she believes offer attractive valuations but are penalised by US interest rates and a strong dollar. “The imposition of US tariffs represents the main risk for the region. However, Trump's first nominations and announcements seem to indicate a willingness to negotiate rather than engage in a full-scale trade war, which could weigh on US growth and inflation,” Dufossé said. “The Chinese government’s successive announcements should help stabilise the country's economic situation and benefit the region as a whole.” 

Her views are shared by Saunders and Mahtani who see investment opportunities in emerging markets. They believe that emerging market equities have a positive outlook for three key reasons: falling US interest rates, continued US economic growth, and attractive valuations compared with developed markets, especially the US. However, Trump’s victory introduces uncertainty, particularly with his tariff policies targeting China, Mexico, and Canada.

“China, despite facing US tariffs, has diversified its export markets, reducing reliance on the US from 20 per cent in 2012 to 13 per cent in 2023. China's recent efforts to stabilise its economy and property market, alongside improving corporate operations and increasing shareholder returns, offer strong stock-picking opportunities,” Saunders and Mahtani continued. “Meanwhile, Asia is emerging as the ‘AI factory to the world,’ with artificial intelligence (AI)-driven technology sectors benefiting from global demand, especially semiconductors and data centres.”

“India and the Middle East are richly valued but show transformative growth, particularly in workforce participation in Saudi Arabia and economic inclusion in India,” Saunders added. “Despite challenges in markets like Brazil and Mexico, which face regulatory and economic hurdles, there are abundant bottom-up opportunities in emerging markets.”

In South Africa, Saunders and Mahtani believe that lower inflation and interest rates provide a positive outlook for banks, insurers, and retail, with the potential for GDP growth to surpass 2 per cent in the medium term, benefiting South African equities.

Fixed income
On government bonds, Candriam is positive on Europe but negative on the US. “We are long German duration in Europe. We remain cautious on French debt, awaiting an agreement on the 2025 budget, and prefer countries like Spain, where growth remains robust. Conversely, we are negative on US duration,” Dufossé said.  

On Credit, Dufossé prefers Europe: “We favour European credit, which benefits from a more favourable interest rate environment and higher spread levels overall than in the US. Regarding emerging market debt, spread levels appear more attractive, but we expect performance, particularly in local currencies, to remain highly dependent on US policy choices.” 

Saunders and Mahtani also believe that opportunities exist in credit in specialised segments and in Europe. “Given the constrained valuations in traditional US investment-grade and high-yield debt, opportunities are greater in specialised credit segments. Structured credit, especially collateralised loan obligation (CLO) mezzanine tranches, is attractively priced compared to corporates,” they said. “Regionally, Europe offers more compelling opportunities, with spreads across asset classes significantly wider than in the US. The focus is on defensive sectors, given the region's weaker growth outlook. The banking sector has outperformed and is expected to continue doing so in 2025, though at a slower pace.” 

Saunders and Mahtani think that emerging markets fixed income could outperform expectations, highlighting that it has shown resilience, despite the challenges. “Although tariffs might harm growth in targeted emerging market countries, selective investment could mitigate this. A stable US yield curve, driven by strong growth without major fiscal stimulus, would benefit emerging market assets,” Saunders said.

Saunders and Mahtani believe that hard currency debt remains attractive with tightening spreads. “Despite challenges from a stronger dollar, high real policy rates in emerging markets provide room for easing. In South Africa, the new coalition government formed in June 2024 could boost growth, though challenges persist. With expected yields of around 10.3 per cent, South African bonds could offer a total return of about 11 per cent by December 2025,” they said.

Gold
Candriam remains positive on gold, which has suffered somewhat from a shift towards cryptocurrencies since Trump's election and has been penalised by a strong dollar and rising US real interest rates. “In the longer term, however, gold retains its role as a diversifier and a protective tool in asset allocation. The underlying demand from many central banks remains strong relative to annual production and limited gold reserves. Any weakness in the price is an opportunity for us to increase our exposure to precious metals,” Dufossé said.

Saunders and Mahtani also favour gold. “While gold is expected to remain in a long-term bull cycle, a period of consolidation appears likely. This could benefit gold mining stocks, which have underperformed due to cost pressures. With weaker energy prices reducing costs, strong cashflows from gold mining stocks are likely to attract investor interest,” they concluded.