Chief investment officers from some of the º£½ÇÊÓƵ's largest asset management firms have predicted that º£½ÇÊÓƵ stocks will outperform global equities in 2025. However, they also cautioned that trade wars pose the greatest threat to investors in 2025, as the election of US President Donald Trump could exacerbate global supply chain issues.
Data from Asset Risk Consultants reveals that nearly a quarter of º£½ÇÊÓƵ CIOs from companies such as Barclays Wealth, Brewin Dolphin, Investec, Rathbones and UBS identified trade wars as the single most significant risk to markets in 2025. The 98 finance chiefs surveyed ranked rising inflation as the second most critical risk, as reported by .
Overall, 20 per cent of respondents said the threat of increasing prices and the response from central banks could continue to negatively affect market sentiment. Government debt levels (15 per cent), stock market concentration (14 per cent), and a potential US recession (eight per cent) were also high on the list of CIO concerns.
"The reality is that many of the risks are interlinked," said James Cooke, deputy CIO of Asset Risk Consultants. "Trade wars combined with a China slowdown could lead to heightened Taiwan tensions which would lead to fears over advanced node semiconductor manufacturing, which in turn would impact many of the Magnificent Seven."
"Inflation rising too much could force central banks to tighten monetary policy more aggressively and the money supply is a significant detriment to the return on risk assets."
Following Trump's US election victory, 43% of CIOs took action in their portfolios, with 34% increasing their US holdings. Two-thirds of respondents expected US stocks to outperform in 2025.
CIOs favour º£½ÇÊÓƵ stocks
Equities have outperformed bonds this year, and the º£½ÇÊÓƵ's top CIOs expect this trend to continue in 2025. In contrast to bond market expectations, 57% of finance chiefs were optimistic about equities, while only 1% were negative.
Investment heads were divided on the pound's 2025 performance, with 21% positive and 24% negative. Only 5% expected the euro to perform well in 2025, while 56% were negative.
Conversely, 53% were positive on the US dollar, and 14% were negative, as Trump's promised tariffs are expected to boost the currency.
CIOs also backed the º£½ÇÊÓƵ equity market for growth, with 35% expecting it to outperform the global market in 2025, compared to 14% who didn't. However, 81% of those surveyed reported exposure to the market of less than 30%, and a third said their exposure was less than 10%.
More than half of the respondents reported a decrease in domestic exposure over the past five years, while only four per cent have increased their domestic exposure. "On the brighter side, there continues to be rather a lot of cash in money market funds or ‘dry powder’," said Cooke from Asset Risk Consultants.
"We would not be too surprised to find 2025 is a year of heightened "animal spirits" and increased M&A activity which tends to be good overall for equity prices, particularly of slightly smaller companies."
"Perhaps this means we will actually see the broadening out of equity markets that many managers talked about around this time last year."
