Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Ten stockmarket themes for 2025 and beyond

by David Philpotts, Head of QEP Strategy and Equity Solutions, QEP Investment Team; and Lukas Kamblevicius, Co-Head of QEP Investment Team

Introduction

Lots of things could have gone wrong in 2024 but ultimately didn’t. Instead, cautious strategists were continually forced to rachet up their market forecasts, as US equities didn’t just climb a wall of worry but charged up it. Whilst there were some wobbles along the way, mostly attributed to uncertainty about the Federal Reserve (Fed), the S&P 500 posted another year of 20%+ returns. This is a feat that has only been achieved in back-to-back years three times in the past century, the last being in the late 1990s. History suggests that this is not necessarily a warning sign as the average return in subsequent years was positive in two out of the three instances. After failing to predict strong gains last year, US equity strategists are clearly sticking to this playbook with the average forecast from the major wall street banks around +10% for 2025.

Last year should have been a good one for stock pickers as there was something for everyone, particularly since the correlation of stock performance dropped to its lowest level in 25 years. However, the dominance of the “Magnificent-7” (Mag-7) led to a highly skewed outcome with only 20% of actively managed mutual funds and ETFs benchmarked against the US outperforming, not dissimilar to 2023. Value managers particularly struggled to find ways to hedge their inability to own the big index stocks. A more appropriate benchmark may be whether they beat the average stock, which according to the MSCI ACWI equally weighted index “only” rose by 5.9% in 2024, more than 12% behind its cap-weighted parent. Whether the current level of market concentration will persist or revert, as has historically happened, is one of the questions currently keeping active managers awake at night.

Our view on 2025 is not dissimilar to this time last year. Alongside the “known-knowns” such as the potential for a global tariff war, there will be plenty of risks to navigate and a wide range of outcomes is likely. Remaining diversified across the quality spectrum whilst not being overly bold on the big stocks (where  fund guidelines permit) will be key. Our best guess is that it will be a better year for active management asthe dominance of the Mag-7 fades with good opportunities both further down the size spectrum and outside of the US. But, aside from an ongoing focus on inflation and what this means for central banks and bond yields, it is likely to be more of a bottom-up market. As such, we resist making sweeping assertions other than flagging the strong probability of higher volatility.

Against that backdrop, we outline some of the key themes to ponder as 2025 unfolds. Many of these themes are interrelated but the big question to address is whether US exceptionalism will continue and what this means for the Mag-7, market breadth and opportunities elsewhere.

Download the full paper

 


 

Leave a Comment:

banner

Most viewed in recent weeks

Why the $5.4 trillion wealth transfer is a generational tragedy

The intergenerational wealth transfer, largely driven by a housing boom, exacerbates economic inequality, stifles productivity, and impedes social mobility. Solutions lie in addressing the housing problem, not taxing wealth.

The 2025 Australian Federal election – implications for investors

With an election due by 17 May, we are effectively in campaign mode with the Government announcing numerous spending promises since January and the Coalition often matching them. Here's what the election means for investors.

Finding the best income-yielding assets

With fixed term deposit rates declining and bank hybrids being phased out, what are the best options for investors seeking income? This goes through the choices, and the opportunities and risks involved.

What history reveals about market corrections and crashes

The S&P 500's recent correction raises concerns about a bear market. History shows corrections are driven by high rates, unemployment, or global shocks, and that there's reason for optimism for nervous investors today. 

Howard Marks: the investing game has changed

The famed investor says the rapid switch from globalisation to trade wars is the biggest upheaval in the investing environment since World War Two. And a new world requires a different investment approach.

Welcome to Firstlinks Edition 605 with weekend update

Trump's tariffs and China's retaliatory strike have sent the Nasdaq into a bear market with the S&P 500 not far behind. What are the implications for the economy and markets, and what should investors do now? 

  • 3 April 2025

Latest Updates

Investment strategies

4 ways to take advantage of the market turmoil

Every crisis throws up opportunities. Here are ideas to capitalise on this one, including ‘overbalancing’ your portfolio in stocks, buying heavily discounted LICs, and cherry picking bombed out sectors like oil and gas.

Shares

Why the ASX needs dual-class shares

The ASX is exploring the introduction of dual class share structures for listed companies. Opposition is building to the plan but the ASX should ignore the naysayers and bring Australia into line with its global peers.

The state of women's wealth in Australia

New research shows the average Australian woman has $428,000 in net wealth, 40% less than the average man. This takes a deep dive into what the gender wealth gap looks like across different life stages.

Investing

The two most dangerous words in investing

Market extremes are where the biggest investment risks and opportunities lie. While events like this are usually only obvious in hindsight, learning to watch out for these two words can alert you to them in real time.

Shares

Investing in the backbone of the digital age

Semiconductors are used to make microchips and are essential to a vast range of technology and devices. This looks at what’s driving demand for chips, how the industry is evolving, and favoured stocks to play the theme.

Gold

Why gold’s record highs in 2025 differ from prior peaks

Gold prices hit new recent highs, driven by a stronger euro, tariff concerns, and steady ETF buying – all while the precious metal’s fundamental backdrop remains solid amid a shifting global economic landscape.

Now might be the best time to switch out of bank hybrids

In this interview, Schroders' Helen Mason discusses investing in corporate and financial credit securities, market impacts of tariffs, opportunities for cash investments, and views on tier two and hybrid bonds.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.