Collective wisdom
2025 predictions from our industry's wise men and women
According to the annual fund manager poll conducted by the AIC, the best performing sector in 2025 is expected to be healthcare, with a fifth (20%) of respondents tipping it to perform strongly.
On a five-year view, 28% of respondents believe information technology presents the most attractive opportunity, followed by energy (20%). The poll was carried out among investment trust managers between 15 and 27 November 2024.
Best performing regions and assets
Fund managers predict the US to be the best performing region next year, selected by more than a quarter of respondents (28%), followed by the UK (24%) and Emerging Markets (16%). For the previous three years, fund managers have tipped the UK as the region most likely to perform well over the coming year.
“Fund managers predict the US to be the best performing region next year, selected by more than a quarter of respondents (28%), followed by the UK (24%) and Emerging Markets (16%).”
Over the next five years, a quarter of investment trust managers (28%) think Emerging Markets is the most attractive region, followed by the UK (24%) and Asia Pacific excluding Japan (16%).
Investment trust managers tip small cap equities as the asset class likely to top the charts in 2025 with 32% of all votes cast, followed by mid cap equities (28%) and large cap equities (12%).
Where will the FTSE close at the end of 2025?
Around two thirds (64%) of investment trust managers believe global stock markets will rise in 2025, with 28% saying they will fall and the rest unsure. Nearly half (44%) of investment trust managers believe the FTSE 100 index will climb above 8,500 compared to 20% who believe it will stay between 8,000 and 8,500. A more pessimistic 36% think the index will fall below 8,000.
Inflation and interest rates
Despite worries about trade wars and geopolitical instability, inflation is considered to be the single biggest threat to equities over the next 12 months with nearly a quarter of respondents (24%) finding it a cause for concern. Most investment trust managers (84%) think UK inflation (CPI) will remain above the Bank of England’s target of 2%.
More than nine-tenths (92%) of respondents to the AIC’s poll believe the Bank of England base rate will fall below 4.5% by the end of 2025. A majority (56%) expect it to settle between 3% and 4%, while only 8% expect it to fall below 3%.
Annabel Brodie-Smith, Communications Director at the Association of Investment Companies (AIC), said: “With ageing populations, the rising demand for cancer cures, Alzheimer’s treatments and weight loss wonder drugs, it is no surprise that investment trust managers have tipped healthcare to be the best performing sector of 2025. Further advances in technology via AI and robotics are likely to continue to drive rapid transformations across this sector.
“After a turbulent year of elections, it’s encouraging to hear managers are optimistic about the prospects for global stock markets in 2025 with nearly two-thirds expecting them to rise despite persistent worries about inflation. As always, it’s important for investors to focus on creating a balanced long-term portfolio which meets their needs – with the help of a financial adviser if necessary.”
“After a turbulent year of elections, it’s encouraging to hear managers are optimistic about the prospects for global stock markets in 2025 with nearly two-thirds expecting them to rise despite persistent worries about inflation.”
Please find below comments from investment trust managers on navigating the markets in 2024, their outlook for 2025 and the biggest risks in 2025. To read more comments from 19 investment trust managers, please click here.
Navigating “a boomerang year” and what’s in store for 2025?
Jean Roche, Manager of Schroder UK Mid Cap Fund, said: “My outlook for 2025 is positive, based on the 20% plus earnings growth which is anticipated by the market for UK mid caps. One technical factor that they will not need to fight this year is corporation tax (which has muted earnings per share growth this year). Lower interest rates and weaker sterling relative to the dollar should also favour UK mid caps. I’m also looking forward to fewer activity-stifling elections in 2025 after the bumper crop of 2024.”
“My outlook for 2025 is positive, based on the 20% plus earnings growth which is anticipated by the market for UK mid caps.”
Emerging markets
Carlos Hardenberg, Portfolio Manager of Mobius Investment Trust, said: “Our core convictions remain in India, Taiwan, and South Korea. India’s well educated, youthful population supports long-term growth, while Taiwan and South Korea lead in innovation, particularly in tech sectors such as AI, 5G, and renewable energy, where we favour asset-light, IP based businesses.
“Following research trips to Southeast Asia, we have recently added exposure to Vietnam and Malaysia. Vietnam, in particular, is showing strong signs of recovery, driven by pro-business leadership, advancements in manufacturing, and stable real estate and banking sectors. Additionally, the removal of pre-funding requirements for foreign investors has boosted liquidity as the country progresses toward emerging market status."
Global equities
Paul Niven, Fund Manager of F&C Investment Trust, said: “I remain relatively constructive on equities. Fundamentals are good, economic and corporate earnings growth remains relatively robust, in many areas, inflation continues to decline and interest rates are falling. Valuations are high, however, though this tends to be concentrated in the US, and in the obvious names, such as the Magnificent Seven. Although the premium levels of growth which are expected from this area look set to diminish, their earnings delivery should still comfortably outstrip that of the wider market. While numerous other areas and markets are trading at lower levels of valuation, growth prospects in these areas typically still appear far more fragile or anaemic.”
“I remain relatively constructive on equities. Fundamentals are good, economic and corporate earnings growth remains relatively robust, in many areas, inflation continues to decline and interest rates are falling.”
The biggest risks in 2025
Global Equities
Paul Niven, Fund Manager of F&C Investment Trust, said: “As always, there are numerous risks. A second term for President Trump is likely to contain surprises and some of the eye-catching election promises would have a significant impact on economies and on markets. There is scope for increasing tensions globally on trade and tariffs which would increase uncertainty levels, regardless of actual implemented policy, and which would hamper growth. Geopolitics are also a clear risk. Markets have generally been sanguine over the conflict in the Middle East and in Ukraine but these two areas do continue to present a source of concern. For markets, an unexpected recession, however, would cause the greatest harm to market pricing.”
Carlos Hardenberg, Portfolio Manager of Mobius Investment Trust, said: “A Trump presidency poses significant risks for 2025, particularly China, which faces the threat of higher tariffs. An escalation in US-China tensions could contribute to global instability, with countries increasingly pressured to align with one side or the other. However, a strong US economy could also have positive spillover effects for emerging markets, boosting demand for emerging market exports through increased US consumer spending.”
“An escalation in US-China tensions could contribute to global instability, with countries increasingly pressured to align with one side or the other. However, a strong US economy could also have positive spillover effects for emerging markets…”
