Where to seek opportunities in an era of geopolitical transformation?

Seismic shifts in global economic and geopolitical dynamics have left the investment world at a crossroads. The new US administration's policies have emerged as the primary source of uncertainty, sending ripples through financial markets worldwide. From the declining value of the US dollar to the changing perception of Treasury Bonds, investors are grappling with a rapidly evolving landscape. This Q&A with Nicolas Bickel, Global Head of Investment Private Banking & CIO at Edmond de Rothschild, delves into the biggest investment challenges of 2025, explores potential allocation shifts, and uncovers promising opportunities amidst the turbulence.

What’s the biggest investment challenge that you face in 2025?

The biggest challenge is undoubtedly navigating the uncertainty generated by the announcements and decisions of the new US administration. The White House’s decisions will play a significant part in shaping the financial markets and the economy over the next few months; however, its intentions are still not very clear. Between “bluffs” and a radical change of doctrine, the decisions are potentially capable of altering the global economic and geopolitical balance as we have known it since decades, as well as the tactical and strategic positioning of portfolios. Over the short term, decreasing USD value and interest rates’ impact on the (temporarily?) decreasing perception of US Treasury Bonds as a safe asset will be highly challenging, especially for EUR and CHF Portfolios.

What are the biggest changes you foresee happening to your allocation over the next six months – in which asset classes will you be increasing or decreasing?

In the short-to-medium term, it seems inevitable to reduce exposure to emerging markets, which face a larger trade deficit with the United States and lack the capacity to offset the negative effects of tariffs with major stimulus packages (except for China).

Exposure to the dollar also needs to be kept under control in an environment of high currency volatility, with the dollar falling sharply against major currencies such as the euro and the Swiss franc.

In the longer term, the beginnings of a paradigm shift in global economic and geopolitical balances, accompanied by upheavals unseen since the end of the World War II, may also lead to changes in strategic portfolio allocations, with an increase in the proportion of defensive assets.

Where are the biggest opportunities you see emerging?

In the short term, we anticipate further outperformance by defensive sectors, whose earnings are less dependent on the economic cycle, particularly for companies with limited international exposure, i.e. those less exposed to potential tariffs. These include telecom operators and utilities.

We take advantage of market volatility to gain exposure to stocks that have been heavily sold off and have reached attractive valuations, while offering long-term potential. This is the case, for example, with luxury stocks in the EU, European banks with little exposure to the US and, selectively, US consumer discretionary stocks, which should benefit from Trump's planned tax cuts later this year.

We also see opportunities in European defence stocks, following Europe's defence awakening and the €800 billion ReArmEU programme.

Finally, we believe that market volatility is a catalyst for adding alternative assets, such as private equity and real estate, which offer strong long-term potential, are less liquid (i.e. not traded daily) and can therefore limit the impact of volatility on portfolios.

Which emerging markets stand out to you the most? How about China – too big a risk or a great opportunity?

Despite the escalating tariffs between the USA and China, and China's specific economic problems such as weak domestic consumption and real estate crisis, the country has considerable capacity to revive its economy despite the impact of the trade war. The valuation of the Chinese market remains attractive, especially if China manages to develop domestic consumption. The situation of emerging countries facing a significant trade deficit with the United States is much more complex, and the relatively small size of some of these economies makes them much more vulnerable to the tariffs that have been imposed on them.

What will you be doing more of in 2025? What will you be doing less of in 2025?

With the very high level of uncertainties we are facing currently, it is rather hard to say what we will do more or less of as it will highly depend on the decisions of the White House and their impact on the world economy. The market needs facts rather than inconsistent and unpredictable announcements. Companies and consumers need clarity to implement capital expenditure effectively and keep the consumption pace. The emergence of a potential recession in the United States is likely to impact asset allocation in other geographic zones, as these areas redirect their trade flows to other areas of activity.

If the new economic world that the US administration seems intent on shaping takes shape, it will become necessary to adjust strategic portfolio allocations over the longer term.

What are you most excited to discuss and learn about at IMpower FundForum this year?

I look forward to engaging with my peers about the transformation of the global economy and geopolitical balance and how it affects portfolio positioning. From one global world to multiple strong economic zones. From globalization to “friendshoring” to “reonshoring” and strong protectionist measures, the past 10 years have altered the balances we were familiar with, and the economy as well as trade supply chains will have to evolve quickly. This will create a lot of uncertainty but will also open up many interesting investment opportunities. I am keen to discuss with IMpower FundForum participants and explore the new investment products and offers that various actors in the financial industry are putting in place.