Global equities present opportunities, uncertainty 

The stage is set for investment opportunities in industrials, materials and technology in the U.S. and Europe next year, says Dave Chan, global portfolio manager at CIBC Asset Management.

In a recent interview, he said those opportunities will be accompanied by a heightened level of uncertainty, due to the change in U.S. leadership with its implications for global trade and inflation.

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Chan said companies in the industrials sector that are focused on energy efficiency, data analysis, and improving operations are expected to do well in 2025.

“We see opportunities in areas where there’s a structural growth driver behind it,” he said.

In materials, Chan said home renovations are likely to boost demand for related products as housing shortages push people to upgrade their homes instead of moving.

“Because of the lack of housing, most people will likely renovate their homes,” he said.

Technology will also remain important, he said, with businesses shifting from buying hardware like chips to investing in software and services that improve productivity and efficiency.

Despite these opportunities, he said there are also a number of challenges heading into 2025. One of the biggest uncertainties is the return of Donald Trump as U.S. president.

“There’s a lot of uncertainty right now in terms of the policies that he’s going to put in place,” Chan said, pointing out that tariffs and efforts to move manufacturing back to the U.S. could disrupt global trade.

Inflation is also a concern, he noted, as higher tariffs might cause prices to rise again.

“If inflation rates start to tick up again, [central banks] might not be as aggressive on cutting interest rates,” Chan said.

Consumer spending also poses a risk.

With Canadian unemployment rising, and with U.S. employment steady but fragile, Chan said any slowdown in consumer activity could affect the North American economy.

“If there’s any changes there, it could impact the markets in 2025,” he said.

For investors, Chan emphasized the value of staying invested for the long term.

“Time in the market is better than timing the market,” he said, noting that investments grow more effectively over time when left to compound.

Looking back at 2024, Chan said global stock markets had a strong run last year, powered by optimism about artificial intelligence (AI), steadying inflation, and solid earnings growth with markets up 20%-plus in 2023.

“Investors came into 2024 really bullish on the market,” Chan said, noting that many investors had already expected central banks to start cutting interest rates.

AI was a big driver of this confidence, Chan said, with early growth focused on semiconductors before expanding into sectors like utilities and industrials.

Strong earnings also helped, he said, with global profits expected to rise 11% compared to 2023.

This article is part of the Advisor To Go program, sponsored by CIBC Asset Management. The article was written without input from the sponsor.