An investment wish list for the decade’s next half

SINGAPORE – Investors reflecting on 2024’s lessons have much to consider in a year of seminal moments.

US President-elect Donald Trump’s decisive victory defied predictions, the S&P 500 achieved nearly 60 record highs and central banks finally began cutting rates, though

a hawkish turn by the Federal Reserve

suggests 2025 could see only two rate cuts instead of the four expected previously.

Elsewhere,

Bitcoin stormed past US$100,000

, while wars in Ukraine and the Middle East persisted.

As 2025 begins, it is a timely moment to peer further ahead and reflect on big structural forces that could go right in the longer term.

In the Trump 2.0 era, what asymmetric investment opportunities might these forces unlock? With an eye towards optimism, here is our investment wish list, not just for 2025, but also the decade’s second half.

AI leads the ‘Roaring Twenties’ way

For the US, the “Roaring Twenties” narrative could gain momentum, fuelled by tax cuts, deregulation and productivity gains from broader artificial intelligence (AI) adoption.

The Roaring Twenties refer to the 1920s, a decade marked by significant cultural, social and economic change, particularly in the US and Europe. It was a time of prosperity, innovation and cultural dynamism that followed the end of World War I.

Our best-case scenario sees the tech rally broadening, supported by potentially favourable policies under the new administration.

Additionally, the US is

relatively insulated from tariff risks

. If gross domestic product growth holds closer to 3 per cent than our projected 2 per cent, more companies and sectors could experience earnings upside in the coming years.

Meanwhile,

agentic AI’s rapid advancement

should bolster global growth. Agentic AI refers to AI systems that exhibit autonomous behaviour and decision-making capabilities, functioning as “agents” in achieving specific goals or tasks.

Across the global AI value chain, revenues could exceed US$1.1 trillion (S$1.5 trillion) by 2027.

Investment-wise, AI semiconductors and leading cloud platforms hold potential. Within Asia, tech-driven economies like Taiwan should benefit.

The AI compute sector and Asia’s AI supply chain, which involves advanced semiconductor foundries and AI server original design manufacturers, should also do well.

In the nearer term, we maintain our bullishness on US equities. We expect the S&P 500 to hit 6,600 by end-2025.

We have also upgraded our AI forecasts in 2025. Combined AI capital expenditure from the largest US tech companies should grow from US$224 billion in 2024 to US$280 billion in 2025, a 25 per cent year-over-year increase.

China’s ‘whatever it takes’ moment

For broader Asia, the question is not whether Trump 2.0’s tariffs are coming, but how Beijing responds. Already, Trump has threatened an additional 10 per cent of tariffs on all China imports starting from day one and

nominated China hawks to key positions.

However, this relentless US pressure could force China to decisively bolster self-reliance, structurally shoring up domestic demand.

This may lead Beijing to recognise the limits of, and move away from, its heavy reliance on manufacturing and exports to maintain an annual GDP growth trajectory of around 5 per cent over the next few years.

This optimistic case could see a strong property and domestic consumption recovery.

In the medium term, a commitment to sustained stimulus, about 30 trillion (S$5.6 trillion) to 50 trillion yuan over the next five to 10 years, could break the debt-deflation cycle, smoothing the advanced tech and manufacturing transition.

Within mainland China, consider more defensive and high-yielding value sectors for now until more policy clarity emerges. Tactically, our preferred exposure is Asia ex-Japan equities, where investors can participate in Taiwan’s AI tailwinds, India’s structural growth and potential mainland stimulus.

Long-term themes take off

Besides AI, other long-term innovations could spark structural shifts. Within renewable energy, China’s dominant role should continue, thanks to its

global electric vehicle (EV)

and battery leadership.

Chinese original equipment manufacturers are already distinguishing their EV offerings with advanced driver-assistance systems, a market poised to double in value to US$70 billion annually over the next five years.

China benefits most, given its dominant 60 per cent market share.

Elsewhere, Asia’s private markets remain under-penetrated despite offering long-term growth potential for risk-tolerant investors.

Currently, private equity and venture capital deal value represents about 1.2 per cent of Asia’s GDP, versus 3.5 per cent in the US and 3.2 per cent in Europe.

In private equity, Asia buyouts have outperformed the MSCI AC Asia TR Index, with returns surpassing it by more than 200 basis points (bps) and 450 bps over 10 and 20 years respectively, according to data as at the second quarter of 2024.

Japan and India stand out as opportunities: Japan for its weakened yen and corporate reforms, and India for its robust economic and demographic growth.

We also see Asia private debt and infrastructure opportunities, but stay selective. Markets with regulations aligned with international standards, particularly in developed Asia, are appealing.

War... and peace?

The reality of realpolitik means the path to resolving conflicts in Ukraine and the Middle East will likely be bumpy.

Yet with Trump’s return, regional US policy objectives are set to shift, introducing more uncertainty but also hopes for conflict resolution.

The incoming administration has signalled a strong resolve to end the war in Ukraine. With this greater willingness to negotiate, our base case envisions a ceasefire that freezes the conflict, with Ukraine ceding territory to Russia.

During his first term, Trump also facilitated the normalisation of diplomatic ties between Israel and several Arab nations under the Abraham Accords. Advancing Arab-Israeli relations, particularly Saudi Arabia, could feature on his foreign policy agenda.

Still, halting wars is one challenge; sustaining peace is another. Within diversified portfolios, maintaining some oil exposure can act as a hedge should Middle East tensions escalate. Supply route disruptions or oil infrastructure damage could push Brent crude above US$100 a barrel.

Beyond active conflicts, Trump faces a more troubled geopolitical landscape than in his first term. Even the core of Europe, traditionally a pillar of stability, is grappling with French and German government collapses, driven by escalating budget crises and economic stagnation.

With the growing risk of governments relying on central banks to finance deficits, diversification into real assets is sensible.

In conclusion, this decade’s unpredictability thus far underscores the importance of staying diversified and preparing for a wide range of market outcomes. We hope this wish list brings some optimism as a fresh year begins.