The super election year of 2024 lies behind us. In addition to another interest rate hike by the major central banks in the USA and Europe, it brought a potentially landmark election victory for Donald Trump in the US presidential election. What is in store for 2025?

In the Funds check series, the fund managers of selected funds look back on the developments of the past year and give their assessment of what to expect from the stock exchanges in 2025. (Please note: forecasts are no reliable indicator of future performance.)

Fund & Performance

ERSTE RESPONSIBLE STOCK AMERICA is a sustainability equity fund that primarily invests in shares of selected companies based or stock exchange listed in North America. The fund's investment process is based on fundamental business analysis. When selecting stocks, high-quality, high-growth companies are used. Investing in shares of companies that are pioneers in terms of ecological, social and governance aspects is the focus of the investment decision.

Note: Please note that an investment in securities entails risks in addition to the opportunities described. Past performance is not a reliable indicator of future performance.

The performance is calculated in accordance with the OeKB method. The management fee as well as any performance-related remuneration is already included. The issue premium which might be applicable on purchase and as well as any individual transaction specific costs or ongoing costs that reduce earnings (e.g. account- and deposit fees) have not been taken into account in this presentation.

Commentary by fund manager Christoph Vahs

How did the 2024 fund perform?

All in all, 2024 was a good year for shareholders with a focus on North America. Thanks to the US Federal Reserve, which was able to achieve an almost perfect soft landing with its interest rate policy, the global stock markets experienced a real boom (please note: stocks can be subject to strong price fluctuations).

After Trump's election as the new US president, the momentum accelerated even further and, towards the end of the year, the major US stock indices were able to reach new all-time highs almost daily. The main market drivers were a US economy that remained resilient, coupled with solid corporate earnings growth and the topic of artificial intelligence (AI). (Please note: investing in securities involves risks as well as opportunities.) The clear outperformance of US mega-cap stocks, or the Magnificent 7 (Nvidia, Apple, Microsoft, Alphabet, Amazon, Meta and Tesla), slowed somewhat in the second half of the year. The election of Donald Trump as the 45th president of the United States in November and his political programme led to significant price gains for financial stocks (banks, financial service providers) and cyclically sensitive equities.

Disclaimer: The companies listed here have been selected as examples and do not constitute an investment recommendation. The securities contained in the fund may be subject to price fluctuations.

 

What were the fund's main areas of focus?

Over the course of the year, we also significantly increased our weighting in the financial sector. The high weighting in the consumer discretionary sector at the beginning of the year was reduced. Weak fundamental data coupled with increasing competition, among other things, prompted us to sell Nike completely. We also recently sold off the two hotel chains Marriot and Hilton (after a good performance). By contrast, our development in the communications services sector has been positive. In addition to Alphabet's good performance, we have increased our weighting in Take Two (video games) and added Spotify, the top dog in music streaming, so that we are now heavily weighted in this sector towards the end of the year.

By contrast, the year was clearly negative for stocks in the ‘CleanTech’ sector (keyword renewable energy). Negative quarterly figures and a political mood swing led to a veritable downward spiral here. We drastically reduced our weighting over the course of the year, among other things by completely divesting ourselves of Plug Power, Shoals Technologies and Solaredge.

Disclaimer: The companies listed here have been selected as examples and do not constitute an investment recommendation. The securities contained in the fund may be subject to price fluctuations.

 

What are your expectations for further economic development?

We currently also see a positive stock market environment for 2025, which should be characterised by moderate growth with stable/slightly falling inflation, tax cuts and deregulation in the US. Nevertheless, we expect to see larger price fluctuations from time to time, depending on the specific economic policy and its possible design under Trump (including import tariffs). A renewed flare-up of inflation and geopolitical developments are also risk factors to be monitored, and could lead to major disruptions in the stock markets (please note: forecasts are not a reliable indicator of future performance).

 

What will you prioritise on this basis?

In addition to the increased weighting in the financial sector (keyword: deregulation), we have also recently expanded our position in the industrial sector. Major infrastructure projects and possible reshoring (the relocation of various companies to the US) to pre-empt possible import tariffs should provide a good foundation for 2025. The election of Donald Trump as US president and the Republican majority in Congress are likely to reinforce these thematic trends. In addition, we continue to see our largest sector, technology (around 44% of the total fund), as a beneficiary of the existing megatrends in the coming year: automation, AI, cybersecurity, robotics and cloud/data centres. In view of current political developments in the US, we will not be increasing our current position in CleanTech for the foreseeable future, but we remain convinced of the sector's importance in the long term (Disclaimer: Please note that investing in securities involves risks as well as opportunities. Forecasts are not a reliable indicator of future performance).

ERSTE RESPONSIBLE STOCK AMERICA

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