Five investment themes for a new era of investing

The world is in flux. Decades-old political alliances are being redrawn, while trading relationships are changing. Recent tariffs from the Trump administration has created greater uncertainty and concerns about higher prices for goods, supply chain disruptions, and slower global growth, have all made markets more volatile. Against this backdrop, aligning with longer-term themes is even more important. Here are some areas we believe will be important over the next decade.

Please remember that the value of investments will fluctuate and returns may be less than the amount originally invested. Tax treatment depends on your individual circumstances and tax rules can change. Chelsea does not offer advice and so if you are unsure of anything please contact an expert adviser.

Ageing demographics

This theme is not new, but it has been largely overlooked in pursuit of other growth themes such as artificial intelligence (AI). Healthcare is the most obvious beneficiary of an ageing population, but it had a dismal run of performance. The MSCI World Healthcare Index rose just 1.6% in 2025, compared with 19.2% for the MSCI World*.

This means investors can buy into this long-term theme at a fraction of the cost. James Douglas, manager on the Polar Capital Healthcare Opportunities fund, says: “Healthcare is heavily out of favour, as illustrated by recent ETF outflows, depressed valuations and low investor appetite, yet the sector has multiple tailwinds that are both dynamic and durable.”

He sees a range of exciting new products coming to market that should drive performance in the sector. “All this is sitting on top of a number of secular, long-term investment themes that include an ageing population that is developing more and more chronic diseases, emerging markets, prevention, industry consolidation and outsourcing.” 

AI, but different

As AI develops and grows, the focus may move away from these AI infrastructure players to other beneficiaries.

Chris Ford, manager of the Sanlam Global Artificial Intelligence fund, gives some examples of the type of companies he is investing in today. “We have a leading provider of online real estate marketplaces, information, and analytics. The company is using AI to revolutionise real estate through the use of digital twins.

“We also started a position in a provider of financial data and industry insights, which is leveraging AI to provide better solutions for its clients through the deployment of sophisticated machine learning models. In the healthcare space, we started a position in a company that is using AI to deliver better treatment for diseases such as cancer through genomic profiling – in the long term, this means better diagnoses and better patient outcomes.”

He believes that China’s Deep Seek is “unequivocally good news, as it will democratise AI”. He also says the trajectory of AI is unstoppable – “who doesn’t want personalised learning programme or fully personalised healthcare treatment, that gives the individual in question the best chance of a successful outcome? The use cases of AI will grow and grow.

The end of US exceptionalism

The US has been the dominant force in global stock markets for much of the past decade. The S&P 500 has delivered an annualised return of almost 13% over the past 10 years*. That compares with just 6% for the MSCI Europe index*. This dominance has seen it become an enormous share of the market capitalisation of global stock markets. US stocks are now 73% of the MSCI World*. JPMorgan Asset Management points out that an investor in an MSCI World tracker has a 16% higher exposure to the US than they would have done a decade ago**.

The US is unlikely to lose its importance as an economic superpower, nor its dominance in global stock markets. However, the current US administration is undoubtedly changing the game. The US stock market has supported very high valuations because it is perceived as ‘exceptional’ – its companies have a growth and dynamism not seen elsewhere. This is under threat. In a market that is ‘priced for perfection’, this is a concern.

Sean Peche, manager of the Ranmore Global Equity fund, says: “I think there is huge risk in the S&P 500. John Templeton says that bull markets die on euphoria. Last year, when Trump came to power, everyone said that lower regulation would cut costs, taxes would be lower. There was a surge of buying, including one Mag 7 ETF where 40% of its assets came in December alone. Now the S&P 500 and Nasdaq have started to decline. It suggests to me that all the buyers have bought.” He has just 15% of his fund in US companies***

The rise of India and China

As the US pursues a policy of greater isolation, it creates a void. China may fill that space. It has the technological prowess, and, as the US picks fights with its allies, countries may become less squeamish about trading with China. Add in the multiple stimulus packages since September last year, an improving economy and low valuations, and China could be on a multi-year trajectory of growth. Funds such as the Allianz China A-Shares fund could be a way to play this domestic revival.

India has been through a wobble since the start of the year. Investors have been spooked by some weakness for the consumer and a slowdown in the country’s infrastructure spending. However, the long-term outlook for the Indian economy looks strong. Its stock market continues to grow and develop, and Indian companies are generally well-managed and profitable.

Emerging market investment is always bumpy. The Invesco Global Emerging Markets fund has weightings across China, South Korea, Taiwan, Brazil and India^, and provides a balanced exposure to the long-term growth themes in emerging markets

The return of hard power

It is becoming increasingly clear that we are living in a more dangerous and less predictable geopolitical environment. Goldman Sachs points out that in the 30 years since the Cold War, global military spending declined by nearly half. Even in the US, defence spending now stands at less than 3% of GDP, a lower share than at any point since the 1950s^^.

This is changing. Goldman Sachs says: “In 2025, governments are making investments in hard power. In his first administration, with bipartisan support from Congress, President Trump increased the defence budget by an estimated $225 billion. Congress has shown interest in working with President-elect Trump on similar investments now. A record 23 of 32 NATO allies now spend 2% or more of their GDP on defence.” The group estimates that China’s annual defence spending has increased to between $330 billion and $450 billion^^. This has implications for defence companies and their supply chains across the world. It may also continue to inflate the value of gold, as investors look for safe havens.

The benign environment of the last decade is changing. However, a new environment will create additional opportunities for skilled active managers.

*Source: index factsheet, 31 March 2025
**Source: JPMorgan, 29 May 2024
***Source: fund factsheet, December 2024
^Source: fund factsheet, 28 February 2025
^^Source: Goldman Sachs, 24 January 2025

Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. The views expressed are those of the author and fund managers and do not constitute financial advice.