Investment Themes to navigate to 2030
02 March 2025
Over the past five years, markets have been shaped by geopolitical turmoil, inflation spikes, and equity market concentration. With so many factors still in flux, Mercer’s latest global investment report encourages advisers to stay the course with diversification.
It has been hard to avoid reacting to the series of significant shocks to the global economy since 2020. But Mercer’s 2025 Themes and Opportunities report draws a line in the sand and outlines a series of structural trends and emerging risks that will define the world’s markets through to 2030.
“We’re still in a transition phase in so many areas,” says Nick White, co-author of the report and Mercer’s Global Strategic Research Director.
“The political backdrop is still a considerable unknown, after an extraordinary year in terms of the volume of elections. Market growth has been heavily concentrated on AI. We’ve had interest rates and inflation spikes – and these have not come down as fast in Australia and New Zealand as in other regions.”
That’s why White urges caution before latching onto specific thematic investments.
“It’s very tempting to focus on tech because it’s been performing well, or biotechnology because you expect it to perform well. But if you’re narrow about your portfolio allocation in this environment, it’s risky,” he says. “Our view is to keep portfolios diversified, including areas that have underperformed in recent years such as emerging market exposures”.
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Don’t give up on diversification
The ‘magnificent seven’ tech stocks have disproportionately influenced market movements over the last few years. As we saw with recent stock market turmoil triggered by large swings in a small handful of stocks, this concentration has risks.
“You need global allocations, because the ASX and NZX is too narrow a market. But you also need inflation-resilient assets in the portfolio. Australia and New Zealand are more sensitive to inflation, and it’s remained stickier here,” observes White. “Commodity equities can give you that, as well as real assets like infrastructure.” Real assets, asset-backed private debt and private equity are also more accessible thanks to the rise of innovative fund structures, making diversification into alternative investments more accessible than before.
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Increase actively managed allocations
Active management is likely to be rewarded in the next market phase, by realising potential opportunities for alpha while keeping a close eye on ever-evolving risks.
For investors seeking consistent income, White suggests focusing on either end of the risk-return spectrum, which he describes as “safe short- to-medium-term bonds at one end, and higher-octane private debt or multi-asset credit at the other.”
“With credit spreads historically tight, an active fixed income manager might be able to achieve a much higher yield.”
Rebecca Jacques, Mercer’s Head of Wealth Management Investment Solutions, notes the importance of actively managing currency risk with hedged fund allocations.
“Currency movements will have a material impact on Australian and New Zealand investor returns, because so many of our assets are overseas,” she says. “The decision not to hedge currency exposure is, in itself, an active decision.
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Diversify AI and tech allocations
While the vertical adoption curve of AI has fuelled the ascent of the ‘magnificent seven’, it’s also had a ripple effect across the broader economy – creating entirely new investment opportunities. The next tech winners could be amongst AI model or hardware providers, the infrastructure to enable AI, and productivity tools or process disruptors.
“The real power of AI will be seen across multiple industries, which means there will be many more players emerging over time,” says White. From AI-enabled healthcare and drug discovery to energy efficiency solutions, there could be an explosion in opportunities to diversify tech allocation.
Rather than trying to predict the next magnificent seven, a regulation- and risk-aware strategy might spread your bets to see how the next wave of experimentation plays out.
The real power of AI will be seen across multiple industries, which means there will be many more players emerging over time.
Mercer Global Strategic Research Director
