Chris Miles, Head of UK & Ireland Client Group, Capital Group
As we embark on a new year, the investment landscape in 2025 is rapidly evolving, presenting challenges and opportunities for investors.
The global economic outlook is improving, particularly in the United States. Investors from around the world are attracted to the US given its many advantages, including an entrepreneurial spirit, access to capital and the kind of robust infrastructure needed to support growth.
This environment has fostered incredible innovation, especially related to artificial intelligence and drug discovery. We call them megatrends, and they have started to create opportunities in a host of other areas, from industrial companies to the energy sector.
Despite persistent anxiety among investors, in my view the long-term outlook remains bright. Whether I’m talking with young entrepreneurs or experienced leaders of established companies, I’ve found there is genuine excitement about the future. The investment landscape will continue to evolve.
Staying focused on the fundamentals with a multi-year horizon will be key to successfully navigating these changes.
- The US business cycle appears to be aging in reverse
The reversal of the US business cycle has very real implications for investors.
Instead of moving through the typical four-stage cycle that has defined the post-World War II era, the US economy appears to be shifting from late-cycle back to mid-cycle. The US economy is benefiting from rising corporate profits, accelerating credit demand, softening cost pressures and a shift toward neutral monetary policy. We saw all four of those in 2024.
We believe the US is headed for a multi-year expansion period, perhaps fending off a recession until 2028. This also provides a favourable backdrop for US stocks. Based on an analysis of returns during previous business cycles, we found that stocks posted a robust 14% return during the midcycle stage. This is notably higher than returns during a latecycle environment. The move back to mid-cycle also effectively postpones the start of the next recession — periods when stock returns have historically been their worst.
- Industrial renaissance is fuelling a new era of growth
From the American heartland to the arid desert, an industrial renaissance is under way. Capex projects are popping up across the US, boosting local economies and creating opportunities for
select companies.
TSMC’s $65 billion build-out of a semiconductor production facility in Arizona is one notable example. It is expected to create thousands of manufacturing and construction jobs. But for every megaproject, there are dozens that remain under the radar.
Scorpius BioManufacturing, for example, has broken ground on a 500,000-square-foot facility to manufacture biodefense molecules that will bring hundreds of jobs to Kansas.
To be sure, this activity is happening outside America, too. The build-out of data centres, rising travel demand and the development of new energy sources are creating growth opportunities for Europe’s industrial titans. In emerging markets, the near-shoring movement is leading to a rewiring of supply chains and the construction of new trade hubs.
These trends represent multi-decade investment opportunities, and we are only in the early stages. Industrial powerhouses in the US and Europe are solidifying their foothold in areas ripe for long-term global growth.
- AI megatrend could boost stocks for years
Artificial intelligence has captured the minds of the public and investors, conjuring up images of a futuristic world completely reshaped by intelligent machines. Overhyped? Probably. Even more opportunities ahead? Also probably true.
That’s because we tend to overestimate megatrends in the short term while underestimating them in the longer term. With some megatrends, such as smartphones or driverless cars, we could reasonably create estimates based on known quantities like global populations or number of cars.
But how do we measure the value of better intelligence? One of the most interesting things about AI is that it’s hard to predict how big it will become. Because it can take on a multitude of human tasks, we consider the AI market to be unknowably massive.
Outside of its tech applications, AI will also create opportunities in some unexpected places. The build-out of data centers requires vast physical resources, including copper, capital equipment and a lot of electricity. Soaring demand for these resources has been a boon for old economy industries including utilities, industrials and Mark Casey mining companies.

- Drug discovery is creating a golden age of health care
Pharmaceutical companies will be under the microscope in 2025. Following last year’s US election, uncertainty over the industry’s regulatory outlook sparked a slump in health care stocks, further pressuring a sector that had lagged throughout the year. But following the sell-off, many companies are trading at attractive valuations, creating opportunities for investors with a long-term approach.
That includes forgotten pharma, or drugmakers that don’t offer weight loss treatments. We looking for opportunities to invest in dividend payers that have been left behind by the market.
While weight loss drugs, such as GLP-1s, tend to capture the spotlight, advances are being made on many other fronts. The largest pharmaceutical companies have more than two hundred drugs in their pipelines.
As these companies tackle some of the world’s most debilitating ailments, patients have experienced lower mortality rates and longer life expectancies. Over the next decade, we could see cures for conditions such as ALS, sickle cell and muscular dystrophy.
Risks are always present when investing in biotech and pharma companies, but we could be at the start of a golden age of healthcare — for patients and for investors.

- There are always reasons not to invest
Imagine going back in time to New Year’s Day 2020 and learning in advance about the biggest events over the next five years.
The COVID-19 pandemic. A steep bear market. Inflation above 9%. Wars in Ukraine and the Middle East. A trade war with China. Political uncertainty in the US. With that knowledge of the outlook, would you want to invest in stocks? Probably not.
“In my 25 years in the mutual fund business, I have never known a good time to invest. There are always a dozen reasons why it makes sense to wait. We have a new president, strife in the Middle East, excessive government regulation, oppressive tax rates and a Congress that is more part of the problem than the solution,” said former Capital Group executive Graham Holloway. Although that may sound like a reflection of the current environment, Holloway’s quote is from 1981.
The point is there are always reasons not to invest, and that’s no different today than it was in 2020 or 1981. But markets have been resilient over time. And investors have typically been rewarded for overlooking near-term uncertainty and keeping focus on their long-term investment goals.
So, going back to New Year’s 2020, what would have happened if you ignored all the troubling events on the horizon and had stayed invested? Since then, the S&P 500 Index has risen more than 100%.