Healthcare, which has endured turbulence in 2024, is expected to be the top-performing sector by 20% of investment trust managers in 2025, according to the Association of Investment Companies.
However, when widened to a five-year view, favour tipped towards information technology, attracting 28% of managers, while a fifth of fund managers believed the energy sector would top the charts.
Annabel Brodie-Smith, communications director at the AIC, said: “With ageing populations, the rising demand for cancer cures, Alzheimer’s treatments and weight loss wonder drugs, it is no surprise that investment trust managers have tipped healthcare to be the best performing sector of 2025. Further advances in technology via AI and robotics are likely to continue to drive rapid transformations across this sector.”
On a regional basis, 28% of managers believed the US would continue its reign as the top performer. This is followed by the UK at 24%. The AIC noted the UK has been favoured as the top performer for the next year for three years in a row now, though this bet is yet to come to fruition.
Despite a tough period for the UK, 44% of investment trust mangers believe the FTSE 100 will climb above 8,500 in 2025. But predictions remain polarised, with another 36% believing it will fall below 8,000.
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Alex Wright, portfolio manager of Fidelity Special Values, said: “Although the UK market continues to remain largely unloved by domestic investors, its attractive valuations are being recognised by other market participants such as overseas corporates and private equity firms. Underlining this interest has been a sharp spike in M&A activity, which typically benefits us given our focus on attractively valued businesses.
“Other supportive dynamics include a more stable domestic political situation given the new government’s large majority, attractive dividends in a global context and the fact that a record number of UK companies are buying back their own shares. Despite this, and given the relatively robust performance of UK companies, it has been a surprise that we have not started to see the valuation gap between the UK and other global markets close.”
In comparison, 64% of fund managers believe global stock markets will rise in 2025, with just 25% claiming they will fall.
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Brodie-Smith said: “After a turbulent year of elections, it’s encouraging to hear managers are optimistic about the prospects for global stock markets in 2025 with nearly two-thirds expecting them to rise despite persistent worries about inflation.
“As always, it’s important for investors to focus on creating a balanced long-term portfolio which meets their needs – with the help of a financial adviser if necessary.”
The most prominent risk equity investors identified for 2025 was inflation, named by nearly a quarter of managers. This comes despite a calming of inflation in 2024 that allowed the Bank of England, the Federal Reserve, and the European Central Bank to lower interest rates throughout the year.
Still, 84% of fund managers believe inflation in the UK will remain above the 2% goal, and just 8% believe the BoE will cut interest rates to below 3%.
Thomas Moore, fund manager of abrdn Equity Income Trust, said: “Wild macro gyrations have made 2024 a boomerang year. We have remained alert to opportunities through the year. Most recently, we have identified beneficiaries of the ‘higher for longer’ rates environment in the form of financial companies whose interest income will remain elevated.
“Trump’s victory should drive an acceleration in US economic growth as businesses respond positively to deregulation and the reduced cost of energy resulting from a policy of ‘drill, baby, drill’. This could shift the debate in Europe, as it becomes more apparent that a more pro-business approach will be necessary to allow European companies to compete.”