Investment bosses back UK stocks in 2025 and fret over Trump
The chief investment officers of some of the UK’s largest asset managers have said they expect UK stocks to outperform global equities in 2025.
However, they’ve also warned that trade wars represent the biggest threat to investors in 2025, as US President Donald Trump’s election threatens to heighten global supply chain issues.
According to data from Asset Risk Consultants, almost a quarter of UK CIOs from firms including Barclays Wealth, Brewin Dolphin, Investec, Rathbones and UBS cited the threat of trade wars as the single biggest risk facing markets in 2025.
The 98 finance chiefs surveyed identified rising inflation as the second most significant risk. Overall, 20 per cent of the respondents said the threat of increasing prices and the response from central banks could continue to dent market sentiment.
Government debt levels (15 per cent), stock market concentration (14 per cent), and a recession in the US (eight per cent) also featured highly on the list of CIO concerns.
“The reality is that many of the risks are interlinked,” explained James Cooke, deputy CIO of Asset Risk Consultants.
“Trade wars combined with a China slowdown could lead to heightened Taiwan tensions which would lead to fears over advanced node semiconductor manufacturing, which in turn would impact many of the Magnificent Seven.”
“Inflation rising too much could force central banks to tighten monetary policy more aggressively and the money supply is a significant detriment to the return on risk assets.”
As a result of Trump’s victory in the US election, 43 per cent of the CIOs said they had taken some action in their respective portfolios, with 34 per cent increasing their holdings in the US. Two-thirds of the respondents said they expected US stocks to outperform in 2025.
CIOs back UK stocks
Equities have outperformed bonds this year, and it seems as if the UK’s top CIOs expect this trend to continue in 2025.
In contrast, 57 per cent of the finance chiefs said they were optimistic about the outlook for equities, compared to just one per cent who were negative.
The investment heads were split on how the pound would perform in 2025, with 21 per cent positive and 24 per cent negative. Only five per cent expected the euro to perform well in 2025, while 56 per cent were negative.
In contrast, 53 per cent were positive on the US dollar, while 14 per cent went negative, as Trump’s promised tariffs are expected to boost the currency.
The CIOs also backed the UK equity market for growth. Overall, 35 per cent said they expected the UK stock market to outperform the global market in 2025, compared to only 14 per cent who didn’t.
However, 81 per cent of those surveyed said their exposure to the market was less than 30 per cent. A third said the exposure was less than 10 per cent.
Over half of the participants said they had seen a decrease in domestic exposure over the last five years, while only four per cent have upped their domestic exposure.
“On the brighter side, there continues to be rather a lot of cash in money market funds or ‘dry powder’,” added Asset Risk Consultants’ Cooke.
“We would not be too surprised to find 2025 is a year of heightened “animal spirits” and increased M&A activity which tends to be good overall for equity prices, particularly of slightly smaller companies.
“Perhaps this means we will actually see the broadening out of equity markets that many managers talked about around this time last year.”