January 2025 - Highlights

2025 - Predictions for the Year Ahead

Following a major year for democracy marked by divergent global economic growth, easing inflation, strong performance of risk assets, and shifting market dynamics what major trends are predicted to shape global finance in 2025?

As we stand at the half-way point between the year 2000 and 2050 one can't help but wonder what to expect in the year ahead. 25 years into the 21st century and the world we live in has changed so rapidly and drastically since the turn of the millennium it's barely recognisable. Hell, even just 5 years ago seems like a lifetime! Though it feels like a brief moment of distraction could make you lose track in this fast-paced, brave new world, five major forces are restructuring the global economy. Driving significant structural changes, these can be collectively referred to as the Five D's (World Economic Forum, 2025).

Deglobalisation

Over 400 years later, John Donne's quote "No man is an island" still holds its meaning. The narrative of globalisation has been challenged in the past decade; however, deglobalisation is not an all-encompassing retreat. The world is experiencing a complex shift. National interests are now central, but opportunities for global cooperation still exist, with certain global industries continuing to thrive. Globalisation was once widely seen as an inevitable force, supported by leaders like former US President Bill Clinton and former UK Prime MinisterTony Blair. The economic struggles faced by many developed nations, such as the decline of manufacturing sectors and stagnant middle-class wages, have fuelled scepticism about globalisation. Meanwhile, China has benefited from open markets, experiencing substantial economic growth and a reduction in poverty. However, this belief has shifted as nationalism and protectionism have gained ground in recent years. Increasing trade restrictions, geopolitical tensions, and supply chain vulnerabilities are now driving economic nationalism and regionalisation. Figures like President-elect Donald Trump, who promised tariffs and withdrawal from multinational agreements, have further amplified the idea of deglobalisation. These factors raise inflation, reduce efficiency, and disproportionately impact emerging economies, while also potentially forming new trade relationships. As countries increasingly prioritise national interests over global cooperation, political shifts have become more pronounced, signalling a move away from the interconnected world economy of the past. However, despite these trends, global trade remains resilient, highlighting a complex dynamic where protectionist policies coexist with continued international economic engagement (Bloomberg, 2025; World Economic Forum, 2025).

Decarbonisation

We're ahead of schedule! Last year, the world exceeded the 1.5°C global warming threshold above pre-industrial levels for the first time, with temperatures reaching 1.6°C higher. This breach of the Paris Agreement's target highlights the rapid acceleration of climate change, driven by high greenhouse gas emissions. The years from 2015 to 2024 have now been recorded as the warmest on history, with 2024’s temperature spike contributing to devastating climate events such as floods, heatwaves, and droughts. While El Ni?o played a role, human-driven climate change remains the primary force behind these extreme weather patterns. While temperatures in 2025 may not immediately replicate 2024's extremes, the year is still expected to be among the hottest on record, with a destabilising impact on global weather patterns. At the same time, sustainable investing is on the rise, with ESG funds projected to represent one-third of global assets by 2025. The growing demand for sustainable investments is driven by both financial returns and the desire to support climate action. Yet this trend has led to increased scrutiny, especially for companies claiming sustainability. A notable shift in the financial sector came when BlackRock, the world’s largest asset manager, withdrew from the Net Zero Asset Managers Initiative (NZAMI), citing pressure from US conservatives and regulatory challenges. NZAMI has since suspended it's activities following the asset manager's exit. Despite this, BlackRock maintains that its investment strategy still evaluates climate-related risks alongside other factors, highlighting the ongoing tension between environmental goals and economic interests (Financial Times, 2025; Financial Times, 2025; Forbes, 2025)

Demographics

Ageing populations and declining birth rates increase fiscal burdens and dependency ratios, lowering productivity and adding inflationary pressures... yet wasn't AI supposed to help increase efficiency in the workplace? Global declining birth rate and ageing populations are but an adiaphorous issue. In the past 70 years, global Total Fertility Rate (TFR) has more than halved falling below the canonically considered replacement-level fertility rate of 2.1 children per woman (enough to replace the two parents plus some margin of error to account for those who unfortunately do not make it to reproductive age). Why is this happening? The main 'culprits' for this situation are considered to include women's empowerment in education and the workforce, and lower child mortality. Right, and the issue here is... what, exactly? Many resources were invested into giving women more options (consequently strengthening the workforce and improving GDP growth) and keeping children alive i.e. this is a happy problem at best. Furthermore, throwing money at the situation is not going to change it. Nations that have implemented policies to boost fertility have not seen much difference. While this isn't meant to say that government support isn't important to promote gender equality with regard to having and raising children one cannot ignore the fact that Sub-Saharan Africa, the world's poorest region, is also the one with the world's highest fertility rate. Lower fertility rates, coupled with increased life expectancies around the world, are creating an aging population. So now living longer is a problem too? Wasn't that the whole point of modern medicine? As people live longer and healthier lives, addressing barriers like ageism in the workplace should be seen as more important than ever. If we look at political leaders in the world's most influential countries most are well beyond the average global retirement age of 65 and they have the power to affect millions of lives! Offering the option to work beyond this age seems increasingly reasonable when taking into account the growing rates of drug and alcohol use, the surge in sexually transmitted infections, growing arrests and convictions, loneliness and idleness amongst baby boomers. Overall it seems that the best way forward might be adapting to and supporting an ageing population, reducing gender disparities where they still exist, and adopting technologies such as AI to help boost productivity to make up for the reduced workforce size (The Lancet, 2024; World Economic Forum, 2022; Business Insider, 2024; The Lancet, 2024; World Economic Forum, 2022; The Economist, 2025).

Debt

Global debt is approaching $102 trillion. Several key factors have contributed to this situation. Governments increased spending during the COVID to support their economies, resulting in higher public debt. This trend continued as nations responded to the ongoing cost-of-living crisis, particularly rising food and energy prices, requiring further financial intervention. Climate change adaptation and mitigation costs are also placing a strain on government budgets, while geopolitical tensions, including defence spending and energy security, have intensified fiscal pressures. Aging populations are another burden, demanding greater healthcare and social services. Meanwhile, slower global economic growth is making it more difficult for countries to generate sufficient revenue to service their growing debt. Developing countries face high borrowing costs that lead to unsustainable debt servicing, diverting funds from crucial sectors like healthcare and education, with many nations spending more on debt than these essential services, affecting billions. Developed economies are also facing significant concerns, as higher borrowing costs from tighter monetary policies are escalating global debt servicing burdens. Additionally, hidden debt, including state-owned enterprise liabilities, is worsening overall debt risks. Public debt is expected to reach 120% of GDP by 2028, driven by pandemic-related spending, sluggish growth, and rising interest rates (International Monetary Fund, 2024; UN Trade & Development, 2024; International Monetary Fund, 2024; Yahoo! Finance, 2025).

Digitalisation

As previously mentioned, emerging technologies, offer significant productivity gains and economic benefits even going to the extent of offsetting much bleaker trends. Digitalisation, advancements in AI and broader technological innovation, hold the potential to provide an uncertain yet much-needed counterbalance to the factors restraining economic expansion. For instance, consider the economic impact of generative AI (GenAI): some estimates suggest it could drive productivity growth of about 1.5% annually as GenAI becomes more widely adopted. While historical technological disruptions warrant some caution, the unique characteristics of GenAI—namely its accessibility and versatility—may enable it to overcome the obstacles that have previously limited the impact of other innovations (World Economic Forum, 2025).

Each of these trends brings both challenges and opportunities reshaping the economic landscape and informing our investment decisions. These trends significantly influence the strategy behind our portfolio selection. By closely monitoring these forces and integrating their implications into our strategy, we aim to position our portfolio to adapt to these global shifts while thriving amidst the structural changes they bring.