Countdown to 2025

10. Private Markets expected to account for 10% of AuM in 2025

Private market assets might be as trendy as Taylor Swift's latest album. They are expected to reach 10% of global assets under management (AuM) in 2025[1]. Why? We believe it’s because private markets can act as a diversifier[2] in portfolios, which can help to mitigate long-term risks as well as providing an 'illiquidity premium.' 

9. Estimated net migration of 9m to the US since end-2022

How has the US continued to add so many jobs? One explanation is the estimated 9.3m people entering the US since 2022. Border encounters are already slowing sharply, but the new administration has campaigned to reduce these number further. We will be watching for major shifts in immigration policy over 2025, which could have profound effects on US growth and inflation.  

8. Model portfolios captured £8bn in net sales

The Model Portfolio Service (MPS) is the rising star of the UK wealth management market, growing 12% in 2023[3], and with £8bn in net sales in 2024. 

7. US equites have been the top asset class in seven of the last 10 years

US equities have dominated over the past decade and are on track to be the best performing asset class in 7 of the last 10 years[4],  thanks to the rise of the “Magnificent Seven” tech giants. These companies added a staggering $5 trillion in 2023 — more than 1.5x the rest of the S&P 500 combined, rivalling the value of the entire French stock market[5]. 

6. Indian GDP growth rate expected to slow to 6.3% in 2025

Indian assets have had staggering successes in recent years. However, towards the end of 2024 investors have been given reasons to pause and reflect following weak corporate earnings and signs of economic slowdown. However, favourable demographics and expected structural growth contribute to a broadly optimistic outlook for the Indian economy.

5. Start of the next ‘quinquennium’ (5 years) or ‘quadranscentennial’ (25 years)

Unlike 2000 when we got the 02 centre and a Robbie Williams single, there is little fanfare about the imminent start of a new quinquennium or quadranscentennial. The last five years have seen Covid, the invasion of Ukraine, inflation and rate hikes, but global equities have been (almost) partying like it’s 1999.

4. Chinese EVs face 45% tax from the EU

Prosperity traditionally comes with the Year of the Dragon, but China’s past 12 months has been met with tribulations, from a declining property sector, scepticism around GDP and now their autos sector. Europe has sparked tensions with the Chinese economy, imposing tariffs of up to 45% for five years on auto companies, with retaliations on dairy products looming.

3. Cumulative green bond issuance surpassed $3trn in 2024

Cumulative green bond issuance surpassed $3trn in 2024, with green bonds accounting for c. 65% of all climate bond issuance YTD[6]. In Asset Allocation we opt to hold several sustainable bonds directly including The Nature Conservancy green bond[7], which has just this year funded the purchase and protection of over 132,000 hectares of land and 600km of rivers![8]

2. Latest UK headline inflation is 2.6%

Inflation data for the UK goes back to 1209, a time of knights and (heraldic) dragons. The Bank of England has almost slain the inflation-dragon, getting headline inflation down from a peak of 11% to 2.3%. But is the beast really dead? Core inflation remains above 3%, and markets believe this severely limits the extent of additional rate cuts. Our view is that the Bank of England will need to do more than expected as weak growth ultimately brings inflation down[9].

1. One year to celebrate Jane Austen

In one year we will celebrate the 250th birthday of Jane Austin. Her thoughts on the new year: "Bringing in a New Year is all about second chances. This year, we vow, we will do it right. We have a second chance to take better care of ourselves. We have a second chance to be kinder, wiser, and better human beings." For those more mathematical, 2025 is a perfect square number (452). The last one was 1936, the next one 2116. Enjoy!

 
[1] Source: PWC Prime time for private markets: The new value creation playbook
[2] It should be noted that diversification is no guarantee against a loss in a declining market.
[3] Source: Keeping MPS clients in focus- NextWealth June 2024
[4] Source: Bloomberg, as at 10 December 2024
[5] Source: Bloomberg as at 31 December 2023
[6] Source: cbi_mr_q3_2024_01c.pdf
[7] For illustrative purposes only. Reference to a particular security is on a historic basis and does not mean that the security is currently held or will be held within an LGIM portfolio. The above information does not constitute a recommendation to buy or sell any security.
[8] Source: The Nature Conservatory 2024 Impact Report, TNC-Green-Bond-Impact-Report-2024.pdf
[9] Assumptions, opinions, and estimates are provided for illustrative purposes only. There is no guarantee that any forecasts made will come to pass.