Investments at the crossroads: Choose your path to 2030 

30 January 2025

The first half of this decade has been a rollercoaster ride for investors. 

After navigating an endless series of geopolitical, pandemic, and AI-disruptive shocks, it’s time to focus on the next horizon.

From inflation spikes to the rapid adoption of AI, investors in Australia and New Zealand have spent five years reacting to unprecedented market swings and the resulting reverberations. Mercer’s latest global investment report encourages you to take a longer-term view and weigh up the next wave of risks and opportunities.

What shape could your investment portfolio take by 2030? With a series of regime changes, super-cycles and mega-trends already in play, the options are much broader than today’s market concentration would have you believe. 

Here are three potential paths you can follow:

  • 1. If you want to ride the next tech wave - consider global equity investments

    It’s been hard to ignore the dominance of the Magnificent Seven: the tech stocks (Amazon, Apple, Google, Meta, Microsoft, Nvidia, Tesla) that have turbo-charged recent stock market gains. As dot-com-bubble financial gravity teaches us, what goes up may eventually come down.

    So where could tech swing next?

    Nick White, co-author of the Themes & Opportunities report and Mercer’s Global Strategic Research Director, believes investors should forget about hunting for the next Magnificent Seven.

    “The real power of AI will be seen across multiple industries, which means there will be many more players emerging over time,” he says. “So you need to consider a diverse and dynamic tech equity allocation – rather than relying on the largest players.” 

    For example, AI is now being used in drones to test water safety, or to enable drug discovery in healthcare.

    The next tech winners could come from any of these four types of providers:

    • AI models and hardware
    • Infrastructure such as energy grids or servers
    • Productivity and efficiency tools
    • Process or industry disruptors.

    Investors cannot rely on Australian and New Zealand equities to get that tech exposure – global allocations will still be critical through the next wave of AI-enabled market growth.

  • 2. If you want to avoid concentration risk – don’t give up on diversification

    The widening performance gap between a small handful of US equities and almost everything else has challenged traditional portfolio thinking – particularly diversification. But with market concentration at almost historic highs, we believe that now is the time to spread your risks more widely. As we saw with recent stock market turmoil, large swings in a few stocks can significantly impact the value of portfolios.

    If your portfolio is narrowly focused on the dominant stocks or aligned with the index, you could miss undervalued opportunities. And with so much still in flux, that’s where potential outperformance may lie.

    “Our view is to keep portfolios diversified, including areas that have underperformed in recent years such as emerging market exposures,” says White.

    From one-off regime change (like the end of ultra-low interest rates) to super-cycles and mega-trends that are reshaping the markets (like the energy transition), consider expanding your allocations in line with broader market trends.

    We believe that this path requires active management – it is not a passive play. For example, with credit spreads historically tight, an active fixed income manager might be able to achieve a higher return with private debt or multi-asset credit. At the other end of the risk-return spectrum, safe short- to medium-term bonds can also provide consistent income.

    Diversifying into alternative investments is also more accessible with the democratisation of asset classes once reserved for institutional investors – including private equity, private debt, and real assets like data centres or health infrastructure.

  • 3. If you want to build in inflation protection – consider long-term real assets and currency management

    Inflation has proven stickier in Australia and New Zealand than other economies, and White notes sensitivity to inflation will remain an issue going forward.

    “It’s quite sensible to have some assets in your portfolio that have historically proved resilient to inflation surprises – including commodity equities, real assets and natural capital like timber land or agriculture,” he says.

    Currency movements also have a material impact on local investor returns, because so many of our assets are overseas. Whether you choose to hedge currency exposure or not, that’s an active decision.

    Although inflation is finally taking a downward turn globally, the ripple effects of geopolitical unrest and emerging populist political movements are yet to be felt. To mitigate these unknown risks, we believe that it is important to focus on an emerging super-cycle that is driving longer-term structural demand: the security of everything.

    Following a series of supply chain disruptions, energy shocks and cyber risks, security-based assets are in focus. That includes securing energy through homegrown renewable energy, securing manufacturing closer to home, securing defence lines, or securing data privacy.

    This super-cycle is likely to see greater investment in renewable energy storage and grid infrastructure as the shift to electrification continues. Australia has a significant resource advantage here, with resources such as lithium in high demand.

Navigating the next five years

Economic cycles are relatively short. Building your wealth for the future requires a much longer perspective. While so much has already changed, we are only mid-way through several super-cycles, and the full impact of these transitions is yet to play out.

The road to 2030 may look uncertain, but we believe there are ways you can take proactive control of your investments and be prepared for the next swing in the markets - by increasing your allocation to active management, staying the course with diversification, and taking a risk-aware approach to currency and inflation shifts.

To learn more about Mercer’s view of long-term trends and emerging risks for investors, download the Themes & Opportunities 2025 report

If you invest for the long-term, can spread your investments, and are aware of the risks, you can aim to limit downside impacts.
Nick White

Global Strategic Research Director

Themes and opportunities 2025

Learn more about the themes which we believe will better position investors for success in 2025 and beyond. 
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