The need for investors to conduct thorough due diligence and consider the broader economic landscape tempers the potential for significant returns in this sector. The investment landscape in 2025 will be shaped by the interplay of technological advancements, market dynamics, and policy decisions, offering both challenges and opportunities for savvy investors.
The sports calendar in 2025 presents a unique landscape with significant events, although major competitions following the recent Summer Olympics and European Football Championships are notably absent. However, there are still exciting moments to look forward to for football enthusiasts. The UEFA Women's EURO in Switzerland and the inaugural Club World Cup in the USA are expected to deliver thrilling moments. Winter sports fans will also gather in Lenzerheide for the Biathlon World Championships, marking the first time this prestigious event will take place in Switzerland.
In the financial realm, 2025 is expected to mirror the transitional nature of the sports world. The previous year saw central banks navigating a complex landscape of interest rate cuts and geopolitical tensions, particularly in the wake of elections in various regions, including the United States. Analysts predict a lack of comparable directional decisions in monetary or geopolitical policy in the new year, but assure that the market will remain dynamic and engaging. The potential return of Donald Trump to the White House adds an intriguing layer to the political and economic narrative.
The current decade has been characterized by a remarkable economic and stock market boom. Global stock markets have experienced a surge of over 50 percent since its inception, while the nominal gross domestic product (GDP) of the United States has expanded by more than 30 percent, and corporate profits have skyrocketed by nearly 70 percent. Despite the backdrop of pandemic-induced lockdowns, ongoing conflicts, and unprecedented inflation and interest rate hikes, this period is being likened to a modern-day version of the Roaring 20s.
UBS CIO GWM outlines two contrasting scenarios for US policy in its "Year Ahead 2025" outlook. On one hand, the new administration could bolster the positive market narrative through tax cuts, deregulation, and favorable trade agreements. Conversely, there are risks associated with potential tariffs, excessive government deficits, and geopolitical tensions that could lead to higher inflation, sluggish growth, and volatile stock markets. The base scenario is expected to lie between these extremes, with analysts anticipating further interest rate cuts as a response to declining price pressures.
The US Federal Reserve has already made moves to cut its target rate by 75 basis points in 2024, with expectations for an additional reduction of 25 basis points in December. Looking ahead to 2025, analysts predict a total cut of 100 basis points, bringing the target rate to a range of 3.25 percent to 3.50 percent by year-end. This anticipated decline in financing costs is seen as a significant factor favoring equities, alongside expected macroeconomic growth.
CIO GWM forecasts a global economic output expansion of 2.9 percent in 2025, slightly down from the expected 3.2 percent in the current year. This positive outlook for corporate profits is expected to sustain the upward trend in stock markets, providing a favorable environment for investors.
A key driver of market momentum is the megatrend of artificial intelligence (AI), which is gaining traction on Wall Street and beyond. Major tech companies, including Alphabet, Amazon, Meta, and Microsoft, are projected to invest a staggering total of $222 billion in AI in 2024, representing a 50 percent increase from the previous year. This influx of capital is expected to yield high growth rates across various AI applications, with projections indicating that sales generated through the AI value chain could exceed $1.1 trillion by 2027.
The Solactive Generative Artificial Intelligence NTR Index, which includes nearly 40 AI specialists, is gaining attention from investors. This index features not only the aforementioned tech giants but also notable players like Nvidia and emerging companies such as C3.ai. The latter has recently expanded its partnership with Microsoft into a strategic alliance, showcasing the growing integration of AI solutions across industries. The chemical company Dow and oil multinational Shell are already leveraging these AI capabilities, highlighting the transformative potential of this technology.
Investors looking to capitalize on the AI trend can consider products like the tracker certificate (symbol: GENAIU), which tracks the Solactive Generative Artificial Intelligence NTR Index without a time limit. Launched in April 2024, this product has seen a successful debut, trading approximately 20 percent above its issue price by the end of November 2024. However, it is essential to note that historical performance does not guarantee future gains, and investors should remain aware of the inherent risks associated with structured products.
As the AI narrative continues to evolve, it is expected to remain a focal point in the stock market and beyond throughout the coming year.