Schroders global expects that in 2025, the US stock market will benefit from the leadership of the seven tech giants, resulting in outstanding market performance. Looking ahead, the investment environment may become more subtle and volatile, with stock market returns facing increased volatility. The firm believes that the high concentration in the US market will continue in 2025, and while globally diversified investments may become more attractive, they still remain optimistic about the US, expecting US stocks to maintain their dominance. The US dollar is in a balanced state, with short-term momentum being offset by long-term concerns. The main beneficiary of the Federal Reserve's possible inability to significantly cut interest rates again will likely be the US dollar, with its policies expected to further boost the dollar in 2026. For artificial intelligence enthusiasts, the major investment by corporations may or may not bring returns, as the application of artificial intelligence is the test facing the future. Schroders global expects the investment themes for 2025 to include: - Expecting stock market returns to face increased volatility - Many positive news on the market has already been accounted for, and there are signs of over-optimism in the investment market. This increases the risk of larger fluctuations in the future investment market, with several potential catalysts, especially the outlook for global trade wars and the return of "bond vigilantes" after decades. - Despite the current unusually uncertain macroeconomic and geopolitical outlook, or perhaps that it is almost impossible to predict, the more pressing issue is whether there will be a change in market leadership, moving away from the dominant themes of 2023 and 2024. - The continuation of the high concentration in the US market may not necessarily be a bad thing. Although from a risk perspective, portfolios may be overly concentrated, index performance may not reflect the same situation. For investors, the most important thing should be the potential for mispricing, rather than concentration. - Based on this, there is not strong evidence that large index stocks have formed a bubble. While the excess returns of large stocks will be increasingly difficult to sustain at the same rate in the future, the high concentration in the market seems likely to continue. However, this does not rule out a change in market leadership. - US stocks are expected to maintain their dominance, but the allure of returns from globally diversified investments is increasing. The strong productivity growth in the US is often seen as a key driver behind the exceptional performance of the US market and stocks in recent decades, and predictions show that this trend will continue. - Valuation-based reasons are the most compelling evidence for a reversal of the dominance of US stocks, as no matter how much impact the "Seven Giants" stocks have, the US stock market appears expensive compared to other regions and its own history. - However, the higher profitability of US companies seems to provide justification for valuation premiums, although this does not mean that the US stock market is cheap. Nonetheless, most of the good news has already been priced in, and attractive potential investment opportunities in other regions have emerged, thus strengthening the rationale for regional diversification. - Artificial intelligence enthusiasts will soon face a test. Artificial intelligence has become mainstream in recent years, and the promise of generative AI to significantly enhance productivity has led companies to invest approximately $1 trillion in capital expenditures in the coming years. There is still no definitive answer as to whether investment will bring returns, and opinions are divided, all based on highly uncertain assumptions. - Comparisons with other inventions like the internet may be exaggerated. The internet provided lower-cost options from the beginning to replace more expensive solutions. In contrast, the development of artificial intelligence technology still requires a considerable amount of funding to operate, and related costs may not decrease over time to make automated workflows cost-effective. Although long-term productivity (and corporate profits) will undoubtedly be higher with artificial intelligence than without, the specific increase in productivity and when its effects will be evident are still uncertain. - The firm believes that more specific case studies of artificial intelligence applications that improve productivity need to be seen to more accurately estimate their benefits. Meanwhile, the firm is skeptical that expectations may already be too high. After 2025, high interest rates and volatility will continue to exist. In addition to globalization, decarbonization, and population structure, the major long-term theme may be that investors' investment returns will decrease. Stock investors need to get used to nominal returns being below 5%, mainly due to the high starting valuations, especially in the US market. Global stock returns outside the US are expected to become more attractive in the future, as their valuations are more attractive, and if the US dollar weakens, it may bring a currency tailwind. However, the likelihood of experiencing years of ultra-loose monetary policies and the possibility of returning to a higher interest rate environment after the post-pandemic period is very high.