Five Thematic Trends to Watch in 2025

AI and Robotics: The Future of Innovation

AI surged to prominence in 2023, with widespread adoption by individuals, businesses, and governments. While tech giants and chip names have dominated headlines, the real story lies in the broader ecosystem of emerging companies and industries harnessing AI to transform their operations. Our recent article on the evolving AI narrative touched on the boom is spreading to software companies, but 2025 can also bring opportunities extending far beyond a few dominant industries.

AI's potential remains vastly untapped. Current applications, including machine learning, natural language processing, and autonomous decision-making, represent just a fraction of what's possible. As these technologies advance, they are set to revolutionize a range of industries:

• Healthcare: AI is already revolutionizing drug discovery, diagnostics, and genome editing, with the potential to accelerate medical breakthroughs and improve patient outcomes.
• Manufacturing: Automation powered by AI is driving efficiency, improving quality control, and reducing operational costs.
• Defense Systems: AI-driven technologies are redefining modern defense, enabling advancements in autonomous drones, surveillance, and predictive analytics for strategic planning.
• Cybersecurity: With cyber threats escalating, AI is crucial in detecting, preventing, and responding to breaches in real time, safeguarding businesses and governments alike.
• Power Infrastructure: As energy grids modernize, AI optimizes power distribution, improves reliability, and accelerates the transition to clean energy solutions.

ETF Ideas:

AI is no longer a distant concept—it’s a transformative force driving innovation across sectors. For investors, the opportunity is clear: tapping into this technological revolution offers exposure to industries poised for significant growth.

• iShares Automation & Robotics UCITS ETF (RBOT): Provides exposure to global companies driving innovation in automation and robotics, spanning sectors like healthcare, manufacturing, and logistics.
• Global X Cybersecurity UCITS ETF (BUG): Offers exposure to companies leading advancements in AI-driven cybersecurity solutions, which are vital in combating growing cyber threats.
• VanEck Defense UCITS ETF (DFNG): Focuses on firms integrating AI-driven innovation into modern defense systems, including autonomous drones, surveillance, and predictive analytics.

Healthcare Innovation: A Growth and Defensive Powerhouse

The healthcare sector stands at the crossroads of structural demand and technological innovation. An aging population is driving sustained demand for treatments and care, while breakthroughs in medical technology and drug development are unlocking unprecedented opportunities for growth.

Historically, healthcare demand has been largely immune to macroeconomic conditions, with global earnings growth in the sector steadily outpacing market averages. This stability, coupled with breakthroughs in medical technology, positions healthcare as a unique investment opportunity that blends defensiveness with growth.

In fact, the industry is undergoing a revolutionary transformation, driven by advancements in:

• Drug Discovery: Decades of genomics research are yielding breakthroughs in tackling diseases like cancer, diabetes, Alzheimer’s, and obesity. AI is revolutionizing the process by predicting chemical reactions, modeling protein structures, and conducting automated "in-silico" experiments, reducing time and costs in early-stage drug development.
• AI in Healthcare Services: Beyond drug discovery, AI is transforming patient care with predictive analytics, personalized treatment plans, and efficiency improvements in healthcare services.
• Robotics and Automation: Robotic-assisted surgeries have rebounded to pre-COVID levels and are increasingly adopted to address labor shortages and improve surgical precision. Automation is also enhancing care delivery across healthcare settings.
• Diagnostics and Minimally Invasive Procedures: Advanced technologies are enabling faster, more accurate diagnostics and less invasive treatments, improving recovery times and patient outcomes.
• Mental Health and Wellness: Growing awareness and innovative treatments for mental health are gaining traction, opening new avenues for growth and investment.

ETF Ideas:

The healthcare sector’s unique blend of growth potential and defensive characteristics positions it as a cornerstone for any portfolio. With rapid advancements in technology and medicine, it’s clear that the future of healthcare is as exciting as it is resilient.

• iShares Healthcare Innovation UCITS ETF (HEAL): Focused on companies revolutionizing healthcare through biotechnology, genomics, and medical devices.
• Global X Genomics & Biotechnology UCITS ETF (GNOM): Provides exposure to firms at the forefront of genomic and biotech innovation, targeting precision medicine and next-gen healthcare solutions.
• iShares NASDAQ US Biotech UCITS ETF (BTEC): Invests in the most innovative U.S. biotech firms, with a focus on groundbreaking drug development and healthcare innovation.

Supply Chain Resilience: Adapting to a Fragmented Global Economy

Global supply chains are undergoing a paradigm shift as businesses adapt to new geopolitical and economic realities. The U.S.-China trade war and protectionist policies, including tariffs introduced during the first tenure of Trump administration, have highlighted vulnerabilities in the global trade system and accelerated efforts to build more resilient and diversified supply chains. Trump has even threatened to impose 60% tariffs on China and 10-20% tariffs globally in his second term beginning January 2025. While these may be negotiation tactics, businesses will continue to prioritize resilience in their operations.

The key drivers of supply chain resilience include:

• Trade Wars and Tariffs: The U.S.-China trade war and associated tariffs have fundamentally altered supply chain strategies, with businesses diversifying away from reliance on China. Countries like Vietnam, India, and Mexico have emerged as alternative hubs for manufacturing and assembly.
• Near-shoring and Friend-shoring Trends: Governments are increasingly incentivizing companies to bring production closer to home to mitigate risks of over-reliance on any single region.
• Supply Chain Redundancy: Businesses are adopting "China+1" strategies, diversifying suppliers and manufacturing bases to increase flexibility and reduce vulnerabilities.
• Geopolitical Risks and Supply Chain Disruptions: Geopolitical tensions, such as the Russia-Ukraine conflict and the COVID-19 pandemic, have amplified concerns about the fragility of global supply chains, pushing companies to invest in redundancy, diversification, and agility.

As businesses face new pressures to ensure resilient and adaptable supply chains, opportunities are emerging in logistics, transportation, and infrastructure sectors:

• Logistics Infrastructure: Demand for ports, warehousing, and transportation networks is on the rise to support localized and diversified supply chains.
• Regional Manufacturing and Trade Hubs: Countries such as Mexico, India, and Southeast Asia are benefitting from increasing demand for manufacturing and export infrastructure as companies look to shift production away from China.
• Efficiency and Sustainability: Logistics companies are focusing on sustainable, more efficient supply chain solutions to meet rising environmental standards.

ETF Ideas:

Investors can tap into the growing demand for resilient supply chains by focusing on logistics, infrastructure, and emerging markets like India and Vietnam:

• iShares MSCI India UCITS ETF (NDIA): Offers exposure to the Indian market, where businesses are seeing increased investments in infrastructure, manufacturing, and logistics to support diversified supply chains.
• L&G E-commerce Logistics UCITS ETF (ECOG): Targets firms driving e-commerce logistics, including warehousing, delivery, and supply chain solutions, as demand for online retail soars.
• iShares Global Infrastructure UCITS ETF (INFR): Provides exposure to companies involved in critical global infrastructure, from transportation to energy grids, supporting supply chain resilience.

The Rise of Affluent Consumers: Opportunities in Luxury and Travel

The global wealth landscape is shifting, with emerging markets set to drive the rise of newly affluent consumers. By 2050, emerging markets are predicted to account for six out of the seven largest economies, reshaping global consumption trends.

Asia will be at the heart of this transformation, as rising incomes and an expanding middle class lead to increased demand for luxury goods, travel, and other high-end services. As these affluent consumers become a major economic force, they will reshape industries from retail to tourism.

ETF Ideas:

As emerging markets expand and become wealthier, the demand for luxury goods and travel experiences will continue to grow, presenting investors with significant opportunities. By targeting ETFs that focus on these sectors, investors can tap into the rise of affluent consumers in these regions.

• SPDR MSCI World Consumer Discretionary UCITS ETF (WCOD): Provides diversified exposure to consumer discretionary firms, capturing growth from rising consumer spending on luxury, travel, and lifestyle experiences.
• Amundi S&P Global Luxury UCITS ETF (LUXG): Targets companies in the luxury sector, including those involved in high-end retail, fashion, and automobiles.
• iShares STOXX Europe 600 Travel and Leisure UCITS ETF (EXV9): Offers exposure to European travel, tourism, and leisure companies poised to benefit from surging demand for experiences.
• iShares Digital Entertainment & Education UCITS ETF (CBUN): Targets companies focused on digital entertainment, gaming, and education, reflecting growing demand for experiential online platforms.

New Economy: Transforming Infrastructure, Connectivity, and Innovation

The New Economy is driven by transformations in infrastructure, digital connectivity, and advanced technologies like 5G and AI. Investments are flooding into sectors such as climate change, mobility, smart cities, and next-gen infrastructure, creating long-term growth opportunities. Urbanization, sustainability, and smarter cities are key drivers, as governments and corporations prioritize modernizing infrastructure to address climate, mobility, and technological challenges. This evolution is reshaping industries and creating new markets.

In addition to AI and automation, the key drivers of the new economy include:

• Sustainability & Climate Change: The global transition to a sustainable future is accelerating investments in green infrastructure, renewable energy, and energy-efficient systems. These innovations are essential for combating climate change and supporting long-term economic growth.
• Smart Cities & Mobility: As cities continue to expand, there’s an increasing demand for connected, intelligent urban environments. Smart cities use data and AI to create more efficient transportation systems, smarter utilities, and enhanced infrastructure, improving quality of life for residents while reducing environmental impacts.
• 5G & Next-Gen Connectivity: 5G connectivity is the backbone of the New Economy, enabling faster, more reliable communications that power smart cities, autonomous vehicles, and industrial automation. It’s a key technology behind the transformation of both infrastructure and digital markets.

ETF Ideas:

• iShares Global Clean Energy UCITS ETF (INRG): Provides exposure to companies involved in renewable energy, from solar and wind to energy storage solutions.
• iShares Digitalisation UCITS ETF (DGTL): Focused on companies driving digital transformation, from 5G networks to cloud computing and connectivity solutions.
• WisdomTree New Economy Real Estate UCITS ETF (WTER): Provides exposure to firms reshaping real estate with smart cities, digital infrastructure, and the rise of next-gen connected spaces.