Review

The equity market year 2025 was characterised by increasing uncertainty and, consequently, high volatility on the markets against the backdrop of US and geo politics. The main drivers were uncertainties surrounding the issue of tariffs and their long-term consequences for the global economy, the future course of the US interest rate policy, and the increasing dependence of the markets on the technology sector and investments in artificial intelligence (AI). This situation notwithstanding, the most recent corporate reporting season (Q3 2025) brought more positive results than expected in Europe and in particular in the USA. In the S&P 500 (the 500 largest companies in the USA), about 82% of companies exceeded analysts' profit expectations.

Outlook

Megatrend: healthcare

• Rising cost pressures in the medical sector are leading to an increased use of medical technology and robotics. A key advantage of minimally invasive procedures is the faster healing of wounds and, consequently, shorter hospital stays.
• Demographic change and an ageing society pose enormous long-term challenges for society. According to WHO estimates, over 22% of the world's population could be over 60 years old by 2050 (in 2015, this figure was less than 12%).
• According to WHO estimates, half of the world's population will need glasses by 2050 – and a significant increase in the number of cataract operations is also expected.

ERSTE FUTURE INVEST is invested in Intuitive Surgical (USA). The company has been a leader in robot-assisted surgical systems for over 30 years. In recent years, there has been a sharp increase in minimally invasive surgical procedures (laparoscopy) – more than 5 million such procedures are now performed worldwide every year. Da Vinci surgical robots are used in more than 5,000 hospitals worldwide, e.g. in the fields of thoracic surgery, gynaecology and urology.

Please note: The companies listed have been selected as examples and do not constitute investment recommendations. There is no guarantee that the securities will remain in the portfolio permanently. Investing in securities involves risks as well as opportunities.

Megatrend: technology

• Every year, there are over 20 million hacking/phishing attacks on companies, organisations, and countries worldwide – this shows that there is no alternative to investing in IT security and infrastructure.
• ERSTE FUTURE INVEST increased its weighting in this area by investing in companies such as Palo Alto and Crowdstrike.
• 90% of all data available worldwide are less than two years old. AI serves as a tool for capturing and processing the unimaginable amounts of data in the information age.
• At the same time, the (global) economy is increasingly dependent on investments in AI. In the USA, about one-third of GDP growth in the first half of 2025 was attributable to the construction of data centres, and estimates of the global cost of further expanding data centres by 2030 are roughly equivalent to Japan's current GDP.

For our ERSTE FUTURE INVEST fund, we bet on TSMC (Taiwan), a global technology leader in contract manufacturing of computer chips, which is benefiting from chip demand and the growth of its largest customers, such as Apple, AMD, and NVIDIA. Due to the multitude of new fields of application, the demands placed on computer chips have increased significantly in recent years, and the technical complexity of the manufacturing process has increased disproportionately. The company is therefore benefiting from growth in the semiconductor industry (demand for chips) and the massive increase in manufacturing complexity due to its absolute technological leadership (e.g. pioneering role in 3-nanometre chip production).

Megatrend: environment

• Water infrastructure (pumps, valves, measurement technology) in Europe and the USA requires enormous investment due to its age. The US Environmental Protection Agency (EPA) estimates that 20-50% of the water in the US pipe network is lost on its way to households.
• Renewable energy (especially solar) has made a comeback in the USA due to more favourable draft legislation and increased legal and planning certainty for investments.

One of our positions in ERSTE FUTURE INVEST is Xylem (USA), a manufacturer of water infrastructure products (pumps, valves, measurement technology) – its main customers are municipal water suppliers and industrial companies. Population and income growth (new middle class) are forcing people to use existing goods more consciously and efficiently. Only 0.25% of the world's water resources are drinkable – according to UNESCO estimates, drinking water reserves are expected to shrink by a further 40% over the next ten years.

Megatrend: lifestyle

• Global spending on leisure and travel remains at historically high levels. Younger generations (millennials and Gen Z) in particular spend a significantly higher proportion of their disposable income on these activities.
• Competition for market share remains fierce in the video and music streaming sector. A certain degree of market saturation is evident in the established markets of North America and Europe, while future growth is expected to come primarily from emerging markets.

One of the shares ERSTE FUTURE INVEST holds is Netflix (USA), the global leader in video streaming with over 300 million subscribers. Successful in-house productions are cheaper than purchasing licences and strengthen user loyalty. New advertising-based subscription models are paving the way for growth in more price-sensitive emerging markets.

Megatrend: economy in transition

• Monetary and fiscal policy easing in China is having an effect – private consumption is also surprisingly stable despite the deflationary environment.
• Further upside potential on the Chinese equity market depends primarily on the implementation of structural reforms with a focus on domestic demand and technology (e-mobility, AI).
• The local market in China is enormous, with more than 100 cities with over 1 million inhabitants and rising purchasing power – for example, the e-commerce market in China is already three times larger than that in the USA.

We have invested in YUM China (China) through ERSTE FUTURE INVEST. YUM China is the largest provider of Western fast food in China, currently operating around 15,000 restaurants, including KFC, Pizza Hut, and Taco Bell. Customer consumption behaviour is comprehensively evaluated and used to generate personalised suggestions at self-service terminals. We have seen a sharp rise in living standards in Asia over the past decade, accompanied by a change in consumer behaviour, especially in urban areas.