What’s really driving the stock market in 2025? A closer look at 3 big trends
What’s fuelling the stock market in 2025? Falling interest rates? The artificial intelligence (AI) boom? Global conflict?
In reality, it’s all of the above. And each is pushing UK shares in different directions.
After two years of elevated borrowing costs, central banks across the globe – including the Bank of England — have now begun easing monetary policy. This has given a much-needed boost to assets like company shares, particularly in the FTSE 250 and tech-heavy global funds.
With ongoing tensions in Ukraine, the Middle East and now Taiwan, defence spending is ramping up on both sides of the Atlantic. That’s had knock-on effects for aerospace and defence firms listed in the FTSE 100.
Meanwhile, AI continues to drive investor enthusiasm, particularly in US mega-cap tech stocks. Nvidia leads the charge, supplying the chips that train and run large language models. Microsoft has invested billions into OpenAI and is embedding AI tools across its software ecosystem. Meanwhile, Meta and Alphabet are racing to develop next-gen AI platforms.
So how can UK investors take advantage of these structural shifts in the global stock market?
A trust that’s all in on tech
One option worth investigating is Polar Capital Technology Trust (LSE: PCT). It’s has been operating for over 25 years and holds a concentrated portfolio of 98 technology shares. Its managers actively seek out the companies driving structural change, including those at the heart of the AI revolution.
Its top four holdings are a who’s who of AI dominance: Nvidia, Microsoft, Meta and Broadcom. Altogether, around 73% of the trust’s assets are invested in North America, where most AI innovation‘s taking place. The remainder is spread across Asia Pacific (11%) and Europe (6%).
Over the past decade, the trust has returned an impressive 444%, which works out to an annualised return of 18.5%. Those are stellar numbers for long-term investors and demonstrate the power of staying invested in transformative trends.
But what are the risks?
Like most investment trusts, Polar Capital Technology Trust can trade at a discount or premium to its Net Asset Value (NAV). At times, this can create short-term mispricings, either favouring new investors or punishing them if sentiment suddenly turns.
It’s also worth noting that the trust uses derivatives. While this can enhance returns, it also increases risk. The use of options or futures can lead to greater volatility, reduced liquidity, or even sudden losses in extreme conditions.
Another consideration is cost. The trust carries a relatively high ongoing charge of 0.8%, which is notably above the average passive index fund. But for those who value active management and exposure to high-growth tech companies, it may be worth paying for.
Riding the AI wave
The stock market in 2025 is being pulled in multiple directions and investors need to be discerning. While Polar Capital Technology Trust might not be the most diversified of funds, it offers a way to tap into the booming AI and tech trends driving global markets today.
For long-term investors seeking exposure to tech growth outside of the UK, I believe this is a compelling option to consider.
The post What’s really driving the stock market in 2025? A closer look at 3 big trends appeared first on The Motley Fool UK.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Mark Hartley has no position in any of the shares mentioned. The Motley Fool UK has recommended Alphabet, Meta Platforms, Microsoft, and Nvidia. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
