January 22, 2025
Navigating 2025 Global Markets: Strategic ETF Insights and Trends for the Year Ahead
View the complete brochure: 2025 Market Outlook and CI ETF Trade Ideas.
Global Market Overview
Global equities maintain a strong position, supported by solid corporate revenue and earnings growth. In the U.S., the “Magnificent Seven”—Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta Platforms, and Tesla—dominate the market, driven by the rapid expansion of high-powered computing and artificial intelligence. These companies are expected to achieve earnings growth exceeding 20% in the next year, well above the broader market. Globally, equity markets also show positive momentum despite moderating economic growth, aided by monetary and fiscal policies that remain supportive, though less aggressive than in the U.S.
PROJECTED GLOBAL EQUITY AND MAGNIFICENT SEVEN EPS GROWTH
Source: Bloomberg Finance L.P., as of November 21, 2024. “Magnificent Seven” includes Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta Platforms, and Tesla.
As most central banks (excluding the Bank of Japan) shift to accommodative stances, improved liquidity is expected to stabilize valuations and reduce market volatility. However, U.S. equities face pressure from historically low equity risk premiums. Rising bond yields and elevated valuations make fixed income a compelling alternative for the first time in years. Notably, stock–bond correlations have turned negative, enhancing diversification opportunities for asset allocators. Outside the U.S., higher equity risk premiums reflect greater market risks compared to bonds.
U.S. EQUITY RISK PREMIUM
Source: Bloomberg Finance Inc., as of October 31, 2024. Bonds: US 10Y Government Bond Yield; Bills: US 3M Government Bond Yield. The chart reflects the spread between S&P 500 earnings yield and yields for the respective bond indices.
While the fixed-income landscape has improved, challenges persist. Yield curves are steepening as monetary and fiscal easing accelerates globally. In the U.S., fiscal imbalances and sticky core inflation near 3% may push sovereign bond yields higher. Canada’s subdued growth and inflation trends enhance its sovereign bonds’ relative appeal. Corporate credit markets remain stable, offering tight spreads that add incremental yield.
Geopolitical and Commodity Markets
Geopolitical conflicts in Europe and the Middle East continue to influence commodity markets. While energy and industrial metals face oversupply concerns, precious metals and uranium attract investors due to inflation, heightened risks, and growing AI-driven energy demand.
CI Global Artificial Intelligence ETF (CIAI)
We anticipate two unusual developments in 2025: 1) The continuation of the artificial intelligence trend, where tools such as ChatGPT will get more popular and more products will roll out over time throughout the next decade. 2) The combination of new U.S. President Donald Trump and the richest person in the world, Elon Musk, as adviser to his government to promote efficiency and innovation. These are major forces that will make market predictions based on traditional wisdom challenging. Equity markets will likely outperform both bonds and cash as 4% earnings growth is a low hurdle to achieve in such an environment. It is likely that the companies that enable and utilize artificial intelligence will continue to enjoy high revenue and earnings growth. Enablers include the usual suspects, semiconductor players, and the unusual suspects, utility companies that supply power to data centres. Users will broaden as the payoff becomes obvious, causing a race to utilize. CIAI (CI Global Artificial Intelligence ETF), an active strategy managed by CI Global Asset Management, offers a diversified portfolio of companies that lead and stand to benefit from this trend.
CI Alternative North American Opportunities Fund (CNAO/CNAO.U)
The United States has the advantages of being a leader in innovation and having a new government that promotes it. President Trump will likely be using this advantage to its fullest, prompting the beginning of “Globalization 2.0” where jobs abroad will return to America by utilizing robots. Other countries that have been laggards in technology will have no choice but to pay tariffs to export to the U.S. and devalue currencies to remain competitive in the near term. As such, USD-denominated assets will likely outperform non-USD-denominated assets. CNAO (CI Alternative North American Opportunities Fund) will benefit from investing in large-cap American companies. It also has hedging tools to deploy to enhance downside protection.
About the Author
Stephen Lingard, Senior Vice President, Co-Head of Multi-Asset, brings first-hand global experience to his role as he has studied and worked in Europe, the US, and Asia over his 27+ year career. He joined CI GAM in 2019 as the multi-asset portfolio and research lead, with a macro, equity and alternative strategy focus. Prior to CI GAM, Stephen was Head of Multi-Asset Solutions with Franklin Templeton (Canada/Asia). Before that, he was an investment manager with Fidelity Investments (US & Canada), and prior to that, he was a Bond dealer at Société Générale Asia (Singapore). Stephen is a CFA charterholder with a BSc from Western University and holds an MBA from EU Business School. He is also a member of the Toronto CFA Society and spends his free time with North Toronto Soccer and Leaside Hockey.
About the Author
Alfred Lam, Senior Vice President, Co-Head of Multi-Asset, joined CI GAM in 2004. He brings over 23 years of industry experience to his portfolio design, asset allocation, portfolio construction, and risk management responsibilities, which include chairing the multi-asset investment management committee and sizing investment bets to drive added value and manage risk. Alfred holds the CFA designation and an MBA from York University Schulich School of Business. He is a recognized leader in multi-asset investing in Canada. During his tenure, his team has won multiple investment awards, including the Morningstar Best Fund of Funds, and saw assets growing four-fold.
IMPORTANT DISCLAIMERS
Commissions, trailing commissions, management fees and expenses all may be associated with an investment in mutual funds and exchange-traded funds (ETFs). Please read the prospectus before investing. Important information about mutual funds and ETFs is contained in their respective prospectus. Mutual funds and ETFs are not guaranteed; their values change frequently, and past performance may not be repeated. You will usually pay brokerage fees to your dealer if you purchase or sell units of an ETF on recognized Canadian exchanges. If the units are purchased or sold on these Canadian exchanges, investors may pay more than the current net asset value when buying units of the ETF and may receive less than the current net asset value when selling them.
CI Liquid Alternative investment funds have the ability to invest in asset classes or use investment strategies that are not permitted for conventional mutual funds. The specific strategies that differentiate these investment funds from conventional fund structure include increased use of derivatives for hedging and non-hedging purposes; increased ability to sell securities short; and the ability to borrow cash to use for investment purposes. While these strategies will be used in accordance with the investment funds' investment objectives and strategies, during certain market conditions they may accelerate the pace at which your investment decreases in value.
This document is provided as a general source of information and should not be considered personal, legal, accounting, tax or investment advice, or construed as an endorsement or recommendation of any entity or security discussed. Every effort has been made to ensure that the material contained in this document is accurate at the time of publication. Market conditions may change which may impact the information contained in this document. All charts and illustrations in this document are for illustrative purposes only. They are not intended to predict or project investment results. Individuals should seek the advice of professionals, as appropriate, regarding any particular investment. Investors should consult their professional advisors prior to implementing any changes to their investment strategies.
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CI Global Asset Management is a registered business name of CI Investments Inc. © CI Investments Inc. 2025. All rights reserved.