Despite continued elevation of geopolitical tensions, BNP Paribas Wealth Management remains optimistic about the financial outlook. The French private bank shares its top investment themes for the year.
Although geopolitical tensions remain elevated, BNP Paribas Wealth Management is still advising clients to stay risk-on and shift out of cash to other assets. The bank has proposed five major investment themes in 2025 to its clients.
Monetary Easing Wave
First, it recommends «surfing the monetary easing wave» with expectations of a coordinated rate-cutting cycle by central banks to continue at least until late 2025.
The bank advises investors to switch from cash to other assets, like bonds, industrials, mid and small caps, gold and leveraged asset classes like real estate, private equity, infrastructure, utilities and clean energy.
New Industrial Revolution
Second, the bank is bullish on physical and digital infrastructure in what it calls «the new industrial revolution». It believes in the need for accelerated investments in roads, internet, power lines and water pipes as well as climate change and energy consumption for new technologies.
In this regard, it sees opportunities for a variety of infrastructure-related investments including data centers, smart grids, transport, clean energy, clean water, network security, nuclear energy, industrial metals and construction materials.
«Free Lunch»
Third, BNP Paribas calls for diversification as still a «free lunch», citing concentration in the global equity index in US technology.
For a better mix and lower risk, it suggests investments in alternative income strategies like private credit and structured products, low volatility relative and global mac alternative UCITS strategies, downside protected strategies, precious metals as well as REITs and value-added real estate.
Monetizing AI
On the AI boom, the bank warns of the potential for disappointment in the near term, referencing previous downturns during the California Gold Rush and the 2000 internet bubble.
To this end, its fourth theme is to seek indirect ways to capitalize on growing spending in AI-related technology. This includes industrial, media, marketing and retail companies with AI-linked productivity and cost gains in the next 12 to 24 months. It is also positive on investments in electricity, data center infrastructure, robotics, automation, healthcare drug discovery, diagnostics and logistic efficiency.
Health Longevity
Its fifth and final theme is on health longevity, calling this the «Holy Grail» given the new norm of longer lifespans.
It advises investors to invest in stocks within select pharmaceuticals, biotech and medical technology, healthcare-focused real estate funds and REITs, health and wellness, and financial services like asset and wealth management and health insurance.
Trade War Risks?
Nonetheless, there are still market risks looming, notably a renewed trade war under US President Donald Trump. While there is a possibility for tariffs to derail the outlook, BNP Paribas remains largely optimistic.
«We definitely expect [tariffs] to go up but gradually over time. And they could be taken away if there are deals to be done, for example, with Canada and Mexico about national security, border fentanyl,» said Prashant Bhayani, chief investment officer Asia at BNP Paribas Wealth Management, in a recent media briefing attended by finews.asia.
«A universal tariff, say, 25 percent on Canada or Mexico in one year or six months […] would be inflationary, but anything short of that would be roughly expected by the market,» he added.
