Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Ten stockmarket themes for 2025 and beyond

by David Philpotts, Head of QEP Strategy and Equity Solutions, QEP Investment Team; and Lukas Kamblevicius, Co-Head of QEP Investment Team

Introduction

Lots of things could have gone wrong in 2024 but ultimately didn’t. Instead, cautious strategists were continually forced to rachet up their market forecasts, as US equities didn’t just climb a wall of worry but charged up it. Whilst there were some wobbles along the way, mostly attributed to uncertainty about the Federal Reserve (Fed), the S&P 500 posted another year of 20%+ returns. This is a feat that has only been achieved in back-to-back years three times in the past century, the last being in the late 1990s. History suggests that this is not necessarily a warning sign as the average return in subsequent years was positive in two out of the three instances. After failing to predict strong gains last year, US equity strategists are clearly sticking to this playbook with the average forecast from the major wall street banks around +10% for 2025.

Last year should have been a good one for stock pickers as there was something for everyone, particularly since the correlation of stock performance dropped to its lowest level in 25 years. However, the dominance of the “Magnificent-7” (Mag-7) led to a highly skewed outcome with only 20% of actively managed mutual funds and ETFs benchmarked against the US outperforming, not dissimilar to 2023. Value managers particularly struggled to find ways to hedge their inability to own the big index stocks. A more appropriate benchmark may be whether they beat the average stock, which according to the MSCI ACWI equally weighted index “only” rose by 5.9% in 2024, more than 12% behind its cap-weighted parent. Whether the current level of market concentration will persist or revert, as has historically happened, is one of the questions currently keeping active managers awake at night.

Our view on 2025 is not dissimilar to this time last year. Alongside the “known-knowns” such as the potential for a global tariff war, there will be plenty of risks to navigate and a wide range of outcomes is likely. Remaining diversified across the quality spectrum whilst not being overly bold on the big stocks (where  fund guidelines permit) will be key. Our best guess is that it will be a better year for active management asthe dominance of the Mag-7 fades with good opportunities both further down the size spectrum and outside of the US. But, aside from an ongoing focus on inflation and what this means for central banks and bond yields, it is likely to be more of a bottom-up market. As such, we resist making sweeping assertions other than flagging the strong probability of higher volatility.

Against that backdrop, we outline some of the key themes to ponder as 2025 unfolds. Many of these themes are interrelated but the big question to address is whether US exceptionalism will continue and what this means for the Mag-7, market breadth and opportunities elsewhere.

Download the full paper

 


 

Leave a Comment:

banner

Most viewed in recent weeks

Which generation had it toughest?

Each generation believes its economic challenges were uniquely tough - but what does the data say? A closer look reveals a more nuanced, complex story behind the generational hardship debate. 

Maybe it’s time to consider taxing the family home

Australia could unlock smarter investment and greater equity by reforming housing tax concessions. Rethinking exemptions on the family home could benefit most Australians, especially renters and owners of modest homes.

100 Aussies: seven charts on who earns, pays, and owns

The Labor government is talking up tax reform to lift Australia’s ailing economic growth. Before any changes are made, it’s important to know who pays tax, who owns assets, and how much people have in their super for retirement.

The best way to get rich and retire early

This goes through the different options including shares, property and business ownership and declares a winner, as well as outlining the mindset needed to earn enough to never have to work again.

A perfect storm for housing affordability in Australia

Everyone has a theory as to why housing in Australia is so expensive. There are a lot of different factors at play, from skewed migration patterns to banking trends and housing's status as a national obsession.

Chinese steel - building a Sydney Harbour Bridge every 10 minutes

China's steel production, equivalent to building one Sydney Harbour Bridge every 10 minutes, has driven Australia's economic growth. With China's slowdown, what does this mean for Australia's economy and investments?

Latest Updates

Economy

Why we should follow Canada and cut migration

An explosion in low-skilled migration to Australia has depressed wages, killed productivity, and cut rental vacancy rates to near decades-lows. It’s time both sides of politics addressed the issue.

Investing

Simple maths says the AI investment boom ends badly

This AI cycle feels less like a revolution and more like a rerun. Just like fibre in 2000, shale in 2014, and cannabis in 2019, the technology or product is real but the capital cycle will be brutal. Investors beware.

Property

Australian house price speculators: What were you thinking?

Australian housing’s 50-year boom was driven by falling rates and rising borrowing power — not rent or yield. With those drivers exhausted, future returns must reconcile with economic fundamentals. Are we ready?

Shares

ASX reporting season: Room for optimism

Despite mixed ASX results, the market has shown surprising resilience. With rate cuts ahead and economic conditions improving, investors should look beyond short-term noise and position for a potential cyclical upswing.

Property

A Bunnings play without the hefty price tag

BWT Trust has moved to bring management in house. Meanwhile, many of the properties it leases to Bunnings have been repriced to materially higher rents. This has removed two of the key 'snags' holding back the stock.

Investment strategies

Replacing bank hybrids with something similar

With APRA phasing out bank hybrids from 2027, investors must reassess these complex instruments. A synthetic hybrid strategy may offer similar returns but with greater control and clearer understanding of risks.

Shares

Nvidia's CEO is selling. Here's why Aussie investors should care

The magnitude of founder Jensen Huang’s selldown may seem small, but the signal is hard to ignore. When the person with the clearest insight into the company’s future starts cashing out, it’s worth asking why.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.