However, according to asset managers, investors should “explore sectors” positioned to benefit from major themes, such as demographic trends, climate change and changes in global manufacturing, including the rerouting of supply chains. global supply and the acceleration of offshoring.
“These themes will continue to attract investors willing to look beyond dominant large-cap stocks,” said Patrick McKeegan, portfolio manager at Franklin Templeton.
As an example, he cited manufacturing automation, which has recently gained momentum.
“This emphasis on automation leads to greater efficiency and flexibility in production and logistics systems,” he said.
Additionally, he highlighted the potential for improved efficiencies and synergies through scaling logistics operations, often achieved through strategic acquisitions.
These benefits, especially in the area of logistics, often remain underestimated, he said.
Likewise, ongoing growth drivers like automotive electrification and data center expansion also tend to be overlooked.
McKeegan cited TE Connectivity, a provider of connectivity solutions for multiple industries, as a potential beneficiary of these trends.
“Companies like TE Connectivity are benefiting from greater electrification of vehicles and, increasingly, from connecting Nvidia racks in data centers – an underappreciated source of growth potential,” he said. declared.
Among its other solutions, TE designs next-generation technologies for data centers and AI connectivity.
Commenting on companies benefiting from evolving technologies, the portfolio manager said the evolution of generative AI, which has fueled the rapid growth of ‘Magnificent Seven’, is opening up opportunities through a range of new applications in a number of sectors, boosting companies such as AMD, maker of semiconductor devices used in computer processing.
Positive points in Japan
Investors looking to broaden their exposure outside of US mega-caps with stretched valuations can find positives in Japan, value in Europe and some sector opportunities, according to French asset manager Amundi.
Amundi said some of President-elect Donald Trump’s promises, if fully implemented, such as possible deregulation and corporate tax cuts, could boost the earnings outlook for U.S. stocks outside of high-value stocks. large cap.
However, the firm advised a focus on value investing and mid-caps, as well as pockets of value in Europe and emerging markets, while anticipating potential declines in US growth stocks and mega-caps.
In its 2025 Investment Outlook, Amundi has identified opportunities in the financials, utilities, communications services and consumer discretionary sectors.
“Across global sectors, we favor a balanced position between early cyclicals and rate-sensitive defensives, with a preference for financials, communications services and utilities,” the report said.
“Financial companies, particularly banks, look particularly cheap and should continue to benefit from the return of capital to shareholders. We like communications services, primarily in the US, given their strong earnings and reasonable valuations.
Utilities, while also attractive, appear even cheaper and should benefit from lower returns in all regions.
“Additionally, utilities are to some extent exposed to the AI theme in the United States,” he added.
Looking ahead, Amundi favors a move towards more cyclical exposure, with an emphasis on consumer discretionary.
He also indicated that several sectors could benefit from trends independent of the economic cycle.
“AI will remain a long-term theme, but it is important to approach investments in this area with caution due to the high valuations of larger companies. The transition should favor software,” he said.
“In the industrial sector, defense will likely benefit from geopolitical tensions, while the relocation of the manufacturing sector will provide broader support. »
Private markets
Private markets are seen as another area offering attractive investment opportunities, given expectations of further interest rate cuts and slowing economic growth.
According to Amundi, private debt offers “attractive income” because companies still benefit from strong bargaining power when negotiating loan contracts.
McKeegan also believes that if the anticipated rate cuts materialize, M&A activity in private markets will see a surge and cyclical headwinds will be reduced and transformed into catalysts for growth.
Amundi, for its part, has identified the infrastructure sector as one of the strengths of private markets, given the sector’s strong growth prospects as well as the diversification of risks and returns.
“We favor infrastructure investments due to their strong growth prospects and stable cash flows. Although volumes remain lower than a few years ago, the market is active,” the report said.
“Governments support private capital as it is needed to complement public financing in building renewable energy infrastructure, achieving transport electrification targets and digitalization of activities, as well as supply chains . »
