Six global themes shaping the investment landscape to come

The 2020s are already halfway through, and the investment landscape has been anything but predictable. The past five years have brought major global changes, from the pandemic's aftermath to rising interest rates and geopolitical unrest. Looking ahead, fiscal pressures, technological advances, political shifts, and evolving global power dynamics promise to keep things interesting.

Against this backdrop, Foord Asset Management recently hosted a thought-provoking webinar that unpacked six critical themes set to shape the investment landscape in 2025 and beyond.

1.     Interest rates redefined

After almost a decade of near-zero interest rates, the aggressive hikes of 2022 marked a historic shift. Although rates have eased slightly since, they remain elevated, signalling a potential "higher for longer" paradigm.

While the resilient US economy has weathered rate hikes well so far, risks of further economic strain persist. If the Federal Reserve cuts rates to counter slowing growth, it could provide a boost to US equities. However, a return to ultra-low rates in the rest of the decade is unlikely, suggesting a more balanced yet cautious outlook for investors navigating this new interest rate environment.

2.     Fiscal debt dilemmas

Governments worldwide are grappling with rising debt and widening fiscal deficits. In the US, the deficit has more than doubled over the past decade to $2.1 trillion – or 6% of GDP. Adjusted for unemployment, this is five-times the post-WWII recovery high.

This trajectory raises pressing questions about sustainability, especially as central banks like China’s diversify away from US Treasuries, contributing to the all-time high gold price. While proposals for tax cuts and reduced government spending may offer short-term market relief, the underlying structural imbalances remain.

With mounting signals of Western, including US, spending and debt reaching uncontrolled levels, investors should be prepared for the implications on asset prices in the next five years.

3.     US exceptionalism: boom or bubble

The US continues to dominate global equity markets, fuelled by strong economic growth, technological innovation, and high valuations. Big tech has been the primary driver here, with top stocks like Nvidia contributing a significant portion of S&P 500 gains.

However, the concentration of returns among a handful of companies with high valuations raises concerns about sustainability. Historically, periods of exceptional stock market performance have been followed by weaker returns.

While the US remains a major force, diversification beyond big tech and US equities is increasingly critical for investors looking to manage risk and capture global opportunities in the years ahead.

4.     Internal politics and deglobalisation

Rising political dissatisfaction continues to shape global trends, often tied to contentious issues like immigration. In developed nations like the US and UK, landmark moments such as Trump’s first election and Brexit signalled growing frustration with high immigration levels. Despite these signals, immigration has remained elevated, while calls for stricter controls are growing louder.

Interestingly, immigration has likely kept wage costs low, benefiting Corporate America but frustrating voters. Rising wages, while beneficial for workers, may squeeze corporate profit margins and weigh on broader economic performance. This will be a major trend to watch as we close out the decade.

5.     South Africa: The GNU and structural reform

The formation of South Africa’s Government of National Unity (GNU) has raised hopes for structural reform, but tangible results are elusive. Given this uncertainty, SA equity investors should prioritise resilient, well-managed companies capable of growth irrespective of broader economic conditions in the medium term.

Meanwhile, global fixed income markets have experienced significant shifts, with US Treasury yields climbing and narrowing the gap with South African bonds. As investors reassess risk-adjusted returns, global inflation-linked bonds stand out as a compelling opportunity for long-term investors, offering potential asymmetric benefits in a volatile economic landscape.

6.     Geopolitics: The West vs The Rest

The geopolitical divide between the West and emerging powers like BRICS continues to grow, fuelled by tensions with China and the ongoing war in Ukraine. South Africa’s alignment with BRICS highlights a shift in global power dynamics, even as its economy remains heavily reliant on Western trade.

While Trump’s trade policies add an element of unpredictability, they are unlikely to specifically target South Africa. For South Africa, maintaining neutral political alignment this decade is crucial to capitalising on opportunities from both “sides”, allowing the country to continue importing from China while safeguarding access to its critical Western export markets.