The strategic decision by AMP to remain overweight in US shares for 2025 underscores a positive outlook on the prospects of US equities. This decision was not made lightly, as it is rooted in a combination of past successes, bolstered future expectations, and keen market dynamics. In the year 2024, AMP experienced notable success, resulting in returns exceeding 15% for its three largest Lifestage cohorts. This success was primarily achieved through a strategic overweight to US and global equities, combined with an increased exposure to private debt and diversified credit.
Members in or approaching retirement, particularly those in Lifestage options from the 1960s and the 1950s, experienced similarly strong returns of 11.5% and 9.8%, respectively. The success of these strategies was largely attributed to both strategic asset allocation and the active performance of equity and credit managers. These managers focused on stocks expected to perform well throughout the year, leveraging their expertise to drive positive outcomes. The data conveys that for AMP, the strategy is not just about past performance but also keen forward-looking strategies that promise sustained results.
Strategic Allocation and Performance
Stuart Eliot, AMP’s head of portfolio management, highlighted the benefits reaped from the overweight in US shares and expressed confidence in their potential to continue delivering strong returns in the forthcoming year. He reiterated a commitment to rebalancing the portfolio where necessary, as well as capitalizing on quality buying opportunities in selected asset classes. Eliot articulated that maintaining an overweight position in US equities makes logical sense given the anticipated support for the share markets from the new US administration and the productivity gains large corporates are expected to achieve through the increasing use of artificial intelligence (AI).
AI is viewed as a pivotal driver for the US market, with investments and developments in this domain anticipated to position the US as a leader in technological advancements. Eliot emphasized that the ongoing integration of AI into business operations will likely lead to significant productivity improvements. This sentiment is rooted in the belief that AI’s role will extend beyond just operational efficiencies and include generating innovative solutions and new business models, thereby fostering overall economic growth.
Technological Advancements and Market Dynamics
Eliot expects to see a narrowing of the earnings growth gap between the “Magnificent Seven,” who are the key market leaders in technology and AI, and other market entities as more organizations begin to harness AI tools to bolster efficiency and profitability. Similarly, renewable energy infrastructure could see substantial growth due to significant tech investments required to meet the energy demands of AI. Such investments will propel earnings growth and support job creation, factors that are favorable to the economy and stock markets alike.
Additionally, advancements in cross-border payments technology are expected to be significant in the coming year. US payments giants such as PayPal and Mastercard are well-positioned to lead in this evolving space. The introduction of Markets in Crypto-Assets Regulation in Europe might prompt US regulators to clarify the use of stablecoins for payments, potentially accelerating the adoption of blockchain-based payment solutions on a global scale. These advancements not only position US companies at a competitive advantage but also contribute to robust market dynamics favorable for investors.
Adjustments in Portfolio Allocations
However, AMP has adjusted its portfolio allocations in certain areas to reflect changing market dynamics. Previously overweight in emerging markets and underweight in Australia, these positions have been revised, taking into consideration potential impacts from geopolitical challenges, particularly those influenced by prospective US economic changes. In the fixed income sector, AMP now favors Australian government bonds over US bonds and has expressed limited appetite for high-yield debt due to tight credit spreads.
Stuart Eliot mentioned that AMP remains open to increasing its allocation to private markets based on emerging opportunities but stressed there isn’t an immediate need to alter its current positions drastically. He also cited the potential for more sellers of unlisted assets if the Coalition’s policy allowing first home buyers to withdraw money from their super is enacted. This willingness to remain flexible and adaptive underscores AMP’s dynamic approach to portfolio management.
Focus on High-Quality Assets and Long-Term Opportunities
Additionally, AMP aims to enhance its allocations to direct infrastructure, both domestically and internationally, with a particular focus on opportunities adhering to strong ESG credentials and those aligned with renewable energy trends. The resurgence of interest in office spaces has prompted AMP to acquire direct property funds at favorable discounts, with these opportunities continuously evaluated on a case-by-case basis to ensure they meet AMP’s stringent quality standards.
In December, AMP ventured into bitcoin, marking their initial modest allocation to the cryptocurrency under their Dynamic Asset Allocation program. Following thorough testing and careful consideration, the company included a small, risk-controlled position in digital assets. This move reflects the structural industry changes and the launch of exchange-traded funds by leading international investment managers, signaling AMP’s readiness to engage with emerging financial technologies.
Long-Term Investment Outlook
AMP’s strategic choice to hold a heavy position in US shares for 2025 reflects a positive forecast for American equities. This decision stems from a combination of past achievements, optimistic future outlooks, and shrewd market analyses. In 2024, AMP saw significant success, yielding returns over 15% for its three largest Lifestage cohorts. This was mainly due to a strategic overweight in US and global shares, along with greater exposure to private debt and diverse credit.
Members nearing or in retirement, particularly those in Lifestage options from the 1960s and 1950s, also enjoyed strong returns of 11.5% and 9.8%, respectively. The success of these strategies can be largely attributed to both strategic asset allocation and the proactive performance of equity and credit managers. These managers targeted stocks expected to excel throughout the year, utilizing their expertise to generate positive outcomes. The data highlights that for AMP, the strategy emphasizes not just historical performance but also forward-looking tactics to ensure ongoing results.