New York headquartered BNY Investments and Switzerland’s UBS Global Wealth Management share their insights on the global outlook and investment opportunities in 2024 and beyond.  

As the global economy remains stable and the US Federal Reserve is expected to continue easing policy through 2025, BNY Investments sees opportunities in active fixed income to enhance returns beyond yields. The firm also believes that artificial intelligence (AI) will continue to be a key theme in equities, echoed by UBS Global Wealth Management.

According to Aninda Mitra, head of Asia macro and investment strategy at BNY Advisors Investment Institute, much depends on the scale and timing of the new US administration’s trade policies in 2025. But, in a baseline, Mitra thinks European growth will pick up gradually on improved consumption spending. This will mainly be aided by rate cuts from the European Central Bank, further lowering of inflation which boosts real incomes, and a drawdown of precautionary savings on improving confidence and sentiment.

Mitra expects a demand stabilisation in China as well – aided by a widening package of policy support measures. “However, any recovery in both Europe and China will remain fragile and susceptible to confidence shocks. Ongoing policy easing, especially by the Fed, accords with lower US rates and dollar stabilisation. These trends should be congruent with a gradual easing in global financial conditions and bodes well for emerging market economies,” she said in a note.

Overall, Mitra maintains a cautious stance tilting towards a soft landing. In a multi-asset setting, this environment favours sovereign fixed income where she maintains a tactical overweight. On equities, where valuations are starting to get stretched in a few sectors, she suggests staying neutral. She is becoming increasingly optimistic on emerging markets on a stable-to-softer tone in the medium-term outlook for the US dollar and stimulative efforts by China. That said, emerging markets are also typically more trade dependent, so Mitra will also be assessing the scale and breadth of any forthcoming US tariff hikes which could impinge on the emerging market outlook.

As the nights draw in and the year-end slowly comes into view, wealth managers are starting to set out thoughts about what the next 12 months will hold. The election on November 5 of Donald Trump to the US presidency was one of the last major uncertainties to be resolved.

Artificial intelligence
Brian Blongastaine, global investment strategist at Newton Investment Management, part of BNY Investments, expects global equities to continue to rise over the next few years driven by strong fundamentals in the major index constituents, and potential for stimulus to drive markets that have been lagging. “Artificial Intelligence will continue to be a key theme driving growth in multiple sectors,” he said.

He expects the US and India to lead the pack over the one, three, and five-year periods. “India continues its quest to becoming the world’s third largest economy and has many tailwinds while the US continues to benefit as the technology hub of the world, led by strong support from investors, with significant capital investments from venture capital and private equity driving world class innovation and a supportive regulatory environment which encourages continued investment and growth,” Blongastaine continued.

He continues to see the AI beneficiaries broaden out throughout 2024 and into 2025. “The AI arms race is supported by trillions of dollars of capital flowing into the ecosystem. No matter who wins the AI competition, those supporting the build out will be the true beneficiaries,” Blongastaine added. “The AI build out adds another tailwind for electric utilities companies, infrastructure firms, and industrials companies who are already benefiting from the global themes of electrification and deglobalisation.”

Within the technology stocks, Blongastaine believes that the winners will continue to win because they have the capital and strong balance sheets to compete. Large cap tech companies in the US have leaned into their strengths to build a large lead over the smaller tech companies. 

While US tech export controls and potential tariffs during US President Donald Trump’s second term are likely to cause volatility in the tech sector, Mark Haefele, chief investment officer, UBS Global Wealth Management, also believes that the positive fundamentals of the AI growth story should continue to drive equity performance. Big tech’s commitment to AI spending remains strong, and AI adoption and monetisation have continued to pick up. Haefele recently raised his 2024 global tech earnings growth forecast to 22 per cent from 20 per cent, and the 2025 growth forecast to 18 per cent from 16 per cent.

“We believe longer-term investors are better advised to take advantage of potential tech volatility in the near term to build up sufficient AI exposure,” Haefele said.

Despite lowering interest rates, Blongastaine still expects access to capital to be costly for smaller cap tech companies, causing them to continue to be undervalued, which creates a good opportunity for active managers to find attractive small cap companies. 

Other themes Blongastaine believes will create investment opportunities over the coming years include companies exposed to climate adaptation and resilience along with the ageing population globally. These topics will continue to gain traction and popularity with each passing year. In addition to tech, Haefele likes the utilities and financials sectors. Globally, he also favours Asia ex-Japan equities and sees value in eurozone small and mid-caps.

Meanwhile, April LaRusse, head of fixed income investment specialists, Insight Investment, part of BNY Investments, believes that robust investor demand through 2024 has caused spreads in investment grade credit to compress to below long-term average levels. “Absolute yields have declined from their peaks, in part due to the compression in spreads, but remain high relative to the last decade. This combination of tight spreads but high absolute yields means some investors are waiting for spreads to widen before increasing allocations,” LaRusse said. She believes this overlooks the potential for active managers to enhance returns in fixed income markets beyond yield alone. In addition to credit selection, active managers can also capture opportunities in duration or yield curve positions, or relative-value positions between markets within global mandates.

For those able to take duration risk, LaRusse believes that active global credit is one of the best ways to position during a global easing cycle.