Advisers bullish on global equities but valuations a worry
A new survey has found advisers are planning to increase allocations to global equities as well as Australian small caps in the next six months, however they believe high valuations in the market remain concerning.
The inaugural Fidante Adviser Markets Survey, which explored investment opportunities and challenges identified by over 200 financial advisers for the first half of 2025, found some 46 per cent remain bullish on the performance of global equities.
Nearly 40 per cent predict it will be the best performing asset class over this period, with one in five advisers now planning to increase these allocations. This is followed by infrastructure (17 per cent) and fixed income (12 per cent) to comprise the top three asset classes predicted to perform well next year.
“Led by the US, global equities have driven significant outperformance for several years now, and our research shows that advisers expect this trend to continue as we enter 2025,” explained Victor Rodriguez, chief executive for funds management at Challenger.
“Specifically, AI and healthcare are driving exciting growth potential in global equities, and we expect inflows to reflect this.
“As we head into 2025, advisers’ optimism highlights the lasting appeal of global equities as a powerful tool to generate returns, even amid economic challenges.”
Advisers outlined a particularly optimistic outlook for equity markets, with 44 per cent stating they are bullish on global equities. In comparison, 40 per cent said they are bullish on emerging markets, and 37 per cent said they are bullish on US equities.
Interestingly, Australian small caps witnessed significantly higher bullishness among advisers (45 per cent). According to the survey, this could indicate a rotation into small caps following the large caps rally of this past year.
“We’re observing a clear shift in focus towards Australian small cap equities, with advisers recognising untapped value in this space after lagged performance in recent years,” said Evan Reedman, general manager, Fidante Affiliates.
Over a third (35 per cent) of advisers expect to increase their client allocations to Australian small caps, compared to just 9 per cent who plan to increase allocations to Australian large caps.
Alongside this, diversification was flagged as a key priority in portfolios. Advisers highlighted infrastructure (30 per cent), private credit (24 per cent) and private equity (18 per cent) as other areas where they plan to increase allocations.
“There is no doubt that advisers are looking for active management in market segments that provide a clear purpose in a portfolio. Whether that be to generate alpha, provide uncorrelated returns, or deliver a consistent income stream,” Reedman added.
Lingering concerns
Despite the bullish outlook, advisers said there are still numerous concerns in the market as they plan their portfolios for the new year, particularly around sluggish growth and market valuations.
Looking at global equities, high valuations is front of mind (26 per cent). This is followed by economic slowdown (23 per cent), and geopolitical tensions (22 per cent) remain front of mind.
Meanwhile, an uncertain domestic outlook sees economic slowdown (44 per cent) top the list of concerns for Australian equities, along with high valuations (27 per cent) and market volatility (11 per cent).
Interestingly inflation no longer seems to be a dominant concern among advisers, although they flagged wariness regarding its impact on equity returns. Almost 60 per cent of advisers said they are “somewhat concerned” about inflation risk.
AUTHOR
Rhea Nath
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