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High inflation has been one of the hot topics of 2024, and 2023 - with rising prices affecting us all. And we predict it will continue to have a major impact in 2025. The rising price of materials and labour can significantly impact the bottom line of any business and challenge its profitability. That is why we focus on identifying quality companies that have strong pricing power and can protect their margins effectively.

Lower interest rates are typically good news for equity markets.  And many central banks cut interest rates in the second half of 2024.  Typically, this is particularly supportive for quality growth stocks, which are the types of companies in our portfolio, so I would welcome more cuts in 2025. However, we could expect further volatility as the market expectations on rate cuts change - and the reaction to inflation data throughout the year will be key.  This is something we shall definitely be keeping a close eye on.

It is fair to say we are in a low growth environment – so how do we find the pockets of growth in order to generate positive returns for our shareholders? In reality there are many bright spots and many sectors of the global economy that are thriving.  At a high level, we believe that Artificial Intelligence, the Energy Transition and Ageing Population are three areas that offer some exciting long-term prospects - and our portfolio has many companies operating in those areas.  But with many investors focussing on those sectors, it is essential to really understand which companies can actually monetise the opportunities – to drive an increase in their competitive position, their earnings and share prices. So having a strict valuation discipline, and a focus on fundamental research, is critical to seeing through the hype and the froth – and we have a consistent approach to both.

China is the world’s second largest economy. It is a massive exporter of manufactured goods and also one of the largest consumers of products and services – particular some of the luxury brands we own in the portfolio.  China’s government has recently taken some effective steps to boost growth and the economy is showing the early signs of the benefits from that – and we hope this continues. Geopolitically, concerns linger about its relationship with Taiwan and the impact that could have on the global supply of microchips that is based there. This issue has sparked the building of chip manufacturing capability in new sites around the world in an effort to de-risk. And, of course, China’s relationship with the US and President Donald Trump is critical.  The potential risk of the introduction of tariffs and the impact on global trade will be critically important for markets in 2025. 

Global equity markets are continually affected and impacted by events – both negative and positive.   As long-term investors – thinking 5 to 10 years ahead - we believe that equity markets offer the best opportunity for investors to grow their wealth over the long term.  And we believe, our approach, which favours quality growth companies with higher margins, solid balance sheets, low disruption risks and exposure to structural growth themes is an attractive proposition.