5 ETF themes for 2025
ETF provider Global X has identified five key themes it expects to play out in the ETF space across 2025.
In its 2025 ETF Game Plan, it said 2024 had presented investors with resilient global growth and double-digit returns. In Australia, specifically, it flagged strong share market returns had been driven by the performance of banks.
However, these banks are now the most expensive in the world, and there could be challenges if the Reserve Bank of Australia retains high interest rates at 4.3 per cent or geopolitical tensions cause uncertainty.
“In Australia, while 2024 delivered strong share market returns, driven largely by the major banks, 2025 may see more tempered growth. Elevated valuations (with the Australian market trading at ~20x earnings), reliance on fiscal policy, and headwinds from a tightening domestic economy and softer growth in China could pose some challenges, further exacerbated if the Reserve Bank of Australia keeps interest rates higher for longer.
“Geopolitical tensions, trade wars, and tariffs could continue to create uncertainty, making diversification critical. Defensive and differentiated strategies, such as exposure to commodities like gold or utilising covered call strategies for income generation, may enhance portfolio resilience as investors look to position their portfolios for 2025.”
The five themes are:
- US exceptionalism
- Transformative potential of artificial intelligence
- Investment opportunities from renewable energy
- Elevated equity valuations
- Alternative income sources as dividend yields decline
US exceptionalism
“The US may be set to lead global markets once again in 2025, driven by diversified sectoral growth, resilient GDP, high corporate returns, deregulation and lower interest rates, solidifying its position as the growth and innovative epicentre of capital markets.”
Transformative potential of artificial intelligence (AI)
“AI is reshaping industries through automation, diagnostics and predictive insights, while surging infrastructure investments in areas such as data centres are fuelling its transformative potential and broader adoption.”
Investment opportunities from renewable energy
“The AI revolution demands renewable energy to be an important source to power its growth, with nuclear and copper playing critical roles, driving investment opportunities across sustainable infrastructure and supporting AI’s expanding global footprint.”
Elevated equity valuations
“Elevated equity valuations may urge investors to adopt a cautious approach to help balance growth potential and stability amid potential slowing growth, stagflation concerns and geopolitical volatility.”
Alternative income sources as dividend yields decline
“Alternative income sources, including banking credit solutions and covered call strategies, may offer resilience as dividend yields decline, providing attractive income opportunities in a potentially low growth and volatile environment.”
AUTHOR
Laura Dew
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