US, Asia to drive growth amid geopolitical uncertainty

Jens Peers: 2024 was a year with a lot of economic and geopolitical uncertainty. We expect a lot of that to continue into 2025. Trump winning the election relatively quickly and convincingly provided more certainty to the outlook of the US economy, however. We expect the US, together with Asia, to be the real driver of economic growth in 2025. Europe, on the other hand, we expect to lag, specifically as the German economy is still suffering from a slowdown in the manufacturing industry, while the French economy is also suffering because of the political uncertainty in that country. 

In this context, it's important to look at what we expect interest rates to do, as it also has an important impact on valuation. Many of the Trump policies we expect to be inflationary in nature, specifically around the introduction of trade tariffs, but also policies around immigration, for instance. 

Jen Peers: We expect American interest rates to rise, and with that, very likely also, a strengthening of the American dollar. That puts the European companies in a much better perspective because they can actually sell at a lower euro and will also likely benefit from a more stable or potentially falling interest rate in the Eurozone as well.

In Asia, there's always been a big focus on China, but we see significant growth in India to continue, specifically in the context of friendshoring and nearshoring, which is still a trend we expect to continue in 2025.

On the other hand, China is also not standing still, and we expect more stimulus from the government to go into the local economy, which would be beneficial from infrastructure and commodity related companies.

Jen Peers: We remain very positive for the outlook for global equities in 2025. If you actually look at a better outlook for the US economy, we also believe that's mainly reflected in valuations, so we still prefer European companies. European companies are, on average, trading at much lower multiples, reflecting a relatively negative scenario. But we also believe that the elections in Germany in February could be a trigger for economic reform, and that could boost equity returns in Europe. 

On top of that, if, and it's still a big if, we would have an end to the Ukrainian-Russian conflict, that could also be a boost for economic growth and equity returns in Europe and specifically for the construction industry. 

Soliane Varlet:  Key focus areas for us include companies enabling AI developments like NVIDIA, those benefiting from AI like Accenture, and the end users of AI across different sectors from agriculture to healthcare. With the advent of Gen AI, we are seeing a rise in energy demand, and this will lead to a rise in carbon emissions. So here of course, renewables are one of the key solution for this increased need for power and increase need for decarbonization. 

New renewable capacity is also cheaper and faster to deploy than other sources like gas or nuclear. Another key focus area is health and medical needs. GLP1 drugs help combat diabetes and obesity and the market opportunity is huge. We are talking about a $30 billion market today to a $150 billion market in 2030, driven by an increasing number of patients, lower treatment rates. Only 2% of people with obesity are being treated medically today. So potential for lifelong treatment and incremental business opportunities, kidney disease, cardiovascular disease, sleep apnea. In pharmaceuticals, we think there are still opportunities in oncology, immunology as well, where we have seen significant innovation. 

Soliane Varlet:, technology and healthcare sectors are our two largest sector exposures. Our portfolio is still very balanced between exposure to cyclical sectors like renewables, and defensive sectors, such as healthcare, and we are also exposed to weather stocks that help to address weather pollution and its impact on biodiversity loss. 

As far as renewables are concerned, we think it's unlikely the Inflation Reduction Act will be repealed in its entirety, especially as 85% of the IRA credits have gone to Republican states. In terms of geographical exposure, we are overweight Europe, but equally throughout the year, we've added some US exposure, some US stocks. Plus the European stocks. We are exposed to are very much global in their revenue exposure. We take a very close look at how they manage their supply chains in order to minimize the risks of US tariffs exposure. Similar to the end of last year, we are still operating under a scenario of higher for longer inflation and rates. 

Jen Peers: we see sustainability research as a very important input in our investment process. Companies that are ignoring sustainability issues could be at risk of underperforming. Think about companies with exposure to Florida, for instance, with the hurricanes over there, or Spain with a lot more floods as a result of a higher risk of climate change as well. 

In the real world, however, we see a lot of companies cutting back officially on their sustainability efforts. A lot of that, we believe, is communication related to political pressure they are feeling. Where companies still believe it has an impact on how they perform financially, they continue to have a strong focus on sustainability, and we think that's really important. And it's also our role to help them to go further in that direction. 

In that context, we see a lot more investors focusing a little bit away from investing only in solutions for sustainability problems and also investing more, in that case, into companies that focus more on transitioning their business models as well. And that's also what we're doing in our portfolios.