Where to put YOUR money in 2025: our stock guru reveals her top tips for boosting returns

Most investors make a New Year’s resolution to renew their portfolio. But, in 2025, an unusual amount of uncertainty surrounds this annual makeover.

How will President-elect Donald Trump’s tariff plans play out, in the United States and around the world?

Will new companies emerge to stop the rise of big tech companies that have been fueled by the generative artificial intelligence (AI) revolution?

John J. Hardy, chief strategist at Saxo Bank, maintains that 2025 will be a year of “big questions,” but it will also be a year of excitement.

“We are entering a new era,” he says. “Old economic models are breaking down, but that creates opportunities.”

What’s the best way to make the most of these bewildering conditions?

Be optimistic, says Mike Fox, head of equities at Royal London Asset Management. “This does not mean that investments can only increase,” he adds.

‘Clearly they don’t do it for a few years.

But, in the long term, societies improve, economies grow, innovation thrives and optimism wins.’

If you like this way of thinking, these are the themes that are expected to set the direction of the major stock markets in the coming months.

America

Donald Trump will be sworn in as US president on January 20 and will subsequently embark on implementing policies including imposing tariffs on imports and cutting the federal budget by $2 trillion (£1.6 trillion ), with the help of Tesla boss Elon Musk. .

The scale of the effort is enormous, but there is a belief that the results could be rewarding.

Niamh Brodie-Machura, co-chief investment officer at Fidelity, believes U.S. corporate profits will surpass those of other developed countries, “reinforcing American exceptionalism.”

Rathbone Asset Management stresses that investors should be prepared for disruption: “It’s Trump, so it’s wise to expect some good, some bad… and some wild.”

Peter Branner, chief investment officer at Abrdn, warns that it would be dangerous to underestimate the extent of the disruption.

In this context, Rathbone argues that “US stock prices may not be cheap, but they are not expensive either,” adding that growth should come from a combination of “tighter finance, less bureaucracy, more private companies, cheaper energy and interest rate cuts. .

In 2024, the best way to cash in on American exceptionalism has been to back the tech stocks that make up the large-cap Magnificent Seven: Alphabet, owner of Google, Amazon, Apple, Meta (the Facebook and Instagram group), Microsoft, Nvidia and Tesla. .

The Magnificent Seven should continue to dominate, but Goldman Sachs Asset Management urges investors to look beyond this gang if they want greater exposure to the generative AI revolution.

For example, semiconductor group Broadcom, which designs processors to accelerate artificial intelligence systems, is being seen as “the new Nvidia.” Stephen

Yiu, manager of the Blue Whale Growth fund, says that Nvidia, already a $3.3 trillion company, would find it difficult to grow another 50%. As a trillion-dollar company, Broadcom has a better chance of achieving that expansion.

For a broader bet on the ‘America First’ strategy, consider an investment fund like JPMorgan American, which owns Apple, Meta, Nvidia and Trane Technologies, which builds cooling systems for the vast data centers in which bases the AI ​​revolution.

Royal Asset Management’s Mike Fox describes the construction of these centers as a “once-in-a-generation investment boom.”

McDonald’s is another holding company. Jack Caffrey, director of the fund, says that this fast food chain has “an iconic, quintessential American brand, and a very defensive model.” A third of the American population eats there every week.

America’s smaller companies also deserve your consideration in light of BNP Paribas’ prediction that their profits could rise 30 percent in 2025 and 2026.

Artemis US Smaller Companies and Premier Miton US Opportunities are the funds chosen by experts to make the most of the potentially remunerative disruption in this sector. Trump’s desire to deregulate takeover rules could spark merger mania.

United Kingdom

Anxiety over the fallout from the autumn budget, inflation and the cost of borrowing appear to threaten UK markets.

But pessimism does not permeate everything. For one thing, since our manufacturing sector is small, Trump’s tariffs should affect us less. Up to two-thirds of those surveyed by broker Jefferies expect the FTSE 100 to rise in 2025.

Analysts say many British companies have strong balance sheets and are generating cash. This suggests they should be more resilient if interest rates stay high longer and inflation becomes sticky.

Guy Anderson, manager of the Mercantile investment fund, sees reasons to be cheerful in the country’s low unemployment, growth in real wages and the low level of household debt.

Taking these factors into account, Anderson is optimistic about the outlook for homebuilders such as Bellway. Since the Budget, shares in these companies have fallen, amid doubts over the Government’s construction targets, but they are now starting to look oversold.

The perception that UK shares are a bargain could mean another burst of takeover activity, following this year’s merger mania, with £52 billion in deals for British companies struck in early November. FundCalibre suggests the TM Tellworth UK Smaller Companies fund as a route to take advantage of this trend.

As 2024 draws to a close, there is talk that focusing on the US means the UK markets are no longer “relevant”. Carl Stick and Alan Dobbie, managers of the Rathbone Income fund, are eager to dispel this notion and decide to champion the cause of UK plc as a source of dividends for the millions who invest primarily for income.

AJ Bell forecasts that FTSE 100 members will pay £83.6bn in dividends in 2025, a 6.5% increase on 2024 and a new record.

Europe

In the coming months it will be difficult to generate enthusiasm for continental Europe. Former EU power Germany has been in recession in all but name, while France is politically stagnant and facing fiscal problems of such magnitude that Abrdn argues it should be seen “as a peripheral market, rather than a central one.” “.

This sounds unattractive, but contrarian investors may think otherwise. Jules Bloch, co-portfolio manager of the JPMorgan European Discovery fund, says valuations of smaller European companies are “at some of their most attractive levels since 2012: interest rates have peaked, real wages are growing and consumer confidence is improving.”

Bloch argues that these companies include the next winners in AI and drug-assisted weight loss. This month, the rapid rise of Novo Nordisk, maker of Ozempic and Wegovy, was slowed by the poor results of its new drug Cagrisema. But a more obscure Danish company is waiting in the wings: Zealand Pharma, whose products also include a weight-loss treatment.

The problems in France and Germany have overshadowed the recovery in Spain, whose Ibex index is up 13 percent this year, and in Italy, where the Borsa Italiana is up 10 percent.

The European Small Business Trust is a way to play a part in the recovery of the beautiful south and in recovery elsewhere.

Porcelain

China will be the main target of Trump’s tariffs. But there are signs that Beijing is preparing for a trade war, preparing to vigorously boost consumption, improve investment efficiency and expand domestic demand. The world’s second-largest economy will strive to halt its decline with a three trillion yuan (£327bn) bond issue to fund innovation.

But betting on a successful outcome will require strong nerves, in light of this year’s failed stimulus packages.

However, as John Citron of JP Morgan Emerging Markets investment fund says, China’s advanced manufacturing and electric vehicle sectors are thriving thanks to government policies that appear effective.

BYD, the electric vehicle maker, is on track to sell more cars in 2024 than Ford or Honda. Its shares have soared 634 percent since 2019.

But analysts still rate the stock a “buy.”

Can the combative Trump (pictured) block BYD’s progress? Or will the company still move faster than European automakers in 2025?

That’s one of the things investors will be watching for in 2025, a year in which no one can assume they have all the answers.