Financing the future: it is necessary to rethink the way we invest

January 2025 by André Themudo

The world has changed since 2020 and we are no longer experiencing a normal economic cycle. There are, in addition, four themes that can condition the evolution of the market: evolution of AI, long-term infrastructures, increasing fragmentation, need for new diversifiers.

Since 2020 we have been arguing that we are not experiencing a normal economic cycle: artificial intelligence (AI) has been a major market driver, inflation has declined without a slowdown in growth, and typical signs of a recession have failed. Historical trends are being disrupted in real time as transformative forces like the rise of AI redefine economies. The over-response of long-term assets to short-term news highlights how unusual this environment is.

This unique scenario demands a new approach to investing. We identify significant opportunities for investors to capitalize on the waves of transformation we foresee in the real economy. Therefore, our first topic is financing the future.

We believe that capital markets play an essential role in building a vast infrastructure network. We also consider it necessary to rethink the way we invest. We advocate for investors to focus more on themes than on asset classes as megatrends transform entire economies. In an environment without a stable long-term trend and with a constantly evolving market, investors should prioritize tactical perspectives. In our opinion, greater dynamism of portfolios and a more detailed approach are crucial.  

Despite all this, we remain risk-on, starting with our confidence in the corporate strength and outperformance of the United States, which benefits most from these megatrends, which drive corporate profits. We believe the most likely scenario for the next six to 12 months is US corporate strength, with earnings growth expanding even as the economy slows slightly. This highlights the resilience of corporate profits, even in a context of high interest rates. However, we have identified four topics that deserve special attention, given that they may affect market developments:

• The evolution of AI

While its rapid evolution presents significant opportunities, the path to a complete transformation is still uncertain. Our three-phase model — build, adopt and transform — allows us to track this evolution and adjust portfolios along the way.

• Long-term infrastructure

AI-related construction is creating a massive and immediate need for data centers. At the same time, demand for green infrastructure is soaring as countries and technology companies compete to reduce emissions. Ageing populations in developed markets, increasing urbanization in emerging markets, and the reorganization of global supply chains are shaping emerging infrastructure needs. Private markets could be an important avenue to gain exposure to this growing demand, helping to bridge the gap between massive financing needs and the budgetary constraints of governments facing high levels of public debt.

• Increasing fragmentation 

Heightened global tensions are accelerating the restructuring of supply chains and the formation of conflicting geopolitical and economic blocs. In 2025, competition between the US and China will intensify as tariffs and policies focused on decoupling strategic sectors accelerate, especially in advanced technologies such as semiconductors. Emerging markets are key suppliers of commodities needed for the transition to a low-carbon economy, such as copper, and growing markets for exports, highlighting their potential influence in the geopolitical context.

• Need for new diversifiers

The erratic correlation between stock and bond yields has defined the new regime, and as a result, Treasury bonds have become a less reliable buffer against stock declines. There is potential for other diversifiers to emerge, both traditional ones like gold and new ones like Bitcoin. It is not about replacing long-term bonds to find diversification, but about looking for new and different sources of risk and return. We believe it is essential to monitor the evolution of the behavior of these alternatives in relation to traditional asset classes and to be agile in their use.