What is your view on the environment for growth equities in 2025?

Investors entered 2025 in a generally upbeat mood, encouraged by a resilient U.S. economy, interest rate cuts, and stimulus in China. While these factors have helped extend the economic cycle, we are mindful that valuations are now vulnerable to potential downside risks, including the threat of higher long-term rates, geopolitical uncertainty, and policy shifts under the Trump administration. Meanwhile, major economies outside the U.S. have struggled to find their footing. We are monitoring pockets of weakness in some countries and sub-sectors and are mindful of the lagged impact of higher interest rates on consumer credit.

As we navigate the upside potential and downside risks for this year, we maintain conviction in a fundamental investment approach, guided by an experienced team of analysts, who bring deep knowledge of their respective sectors.

Where is the Research Team identifying opportunities and risks for the months ahead?

Here’s what our sector team leads are excited – and concerned – about:

• Technology – As companies and households seek to boost productivity through the use of artificial intelligence (AI), we believe the most innovative constituents of the tech sector will increase their share of global earnings and a relatively narrow group of winners will emerge among companies creating AI infrastructure. Software companies capitalizing on AI-driven efficiencies may also benefit, as are internet companies aggressively seeking to leverage AI to improve competitive positioning. There are risks, however, including on the regulatory front. We expect certain export controls to remain in place or become more restrictive under the Trump administration. In the internet space, leading companies will likely continue to face questions about their size and reach.
• Financials – Positive cyclical trends exist around pricing in commercial property and casualty insurance, as well as U.S. personal auto insurance. The growth in electronic payments continues to be exciting, and we see opportunity in companies leveraging AI to better serve customers, capture market share, or improve risk underwriting.
• Healthcare – Following several years of relative underperformance, the healthcare sector is seeing accelerating innovation and discounted valuations. We are encouraged by developments such as GLP-1 weight-loss drugs, robotic surgery, and atrial fibrillation devices that tap large addressable markets. Industry pipelines remain at record levels, with important late-stage clinical trial readouts expected in 2025. Still, we recognize sources of uncertainty, including possible healthcare policy changes under the Trump administration.
• Industrials – The industrials environment has been stuck in neutral for a while, with cyclical end markets such as freight, factory automation, and off-road machinery continuing to face headwinds. It remains to be seen whether the Trump victory can resurrect business confidence and capital expenditures in the industrial economy, after customers paused orders leading up to the election. If so, we could see a positive inflection for industrials stocks with short-cycle businesses.
• Energy & Utilities – We anticipate crude oil prices will oscillate between $70 and $80 per barrel, a narrow range we expect will be maintained by relatively disciplined supply management by the Organization of the Petroleum Exporting Countries (OPEC). Of course, oil prices often surprise the market, and any breakout from this band for a sustained period is likely to be downward, in our view. Potential tariffs and sanctions imposed by the Trump administration could also impact energy pricing and stock performance. Domestically, we see rising power demand as a key theme for both utilities and energy companies.
• Communication Services – The sector was a good place to invest in 2024, driven by investor excitement over streaming, digital advertising, and AI. Despite near-term uncertainty around the pace of AI-related spending, we remain bullish on data center capital investment even as we foresee inevitable bumps in the road. Concern about monetization is now consensus and, while we doubt the handoff to the application layer will be entirely graceful, we’re reminded that a similar consensus existed about the “World Wide Web” before Netscape came along in 1997. Digital advertising demand has remained solid for the largest online platforms, and global travel continues to be resilient, with some signs of accelerating demand in certain markets.
• Consumer – U.S. consumers have remained a strong engine of economic growth, with a robust jobs market, moderating inflation, and rate cuts underpinning strength in retail sales and discretionary spending. These factors could continue to support consumer discretionary stocks in 2025. That said, we remain alert for surprises, especially given potential policy changes under the Trump administration and lofty valuations for some stocks. Our holdings continue to be focused on companies we feel have resilient and/or disruptive business models. The digitization of the consumer economy, in motion for nearly 30 years, shows absolutely no signs of decelerating.

How has your approach of having dedicated sector specialists who conduct independent research helped the Fund achieve consistent outcomes?

Our approach to research has remained the same for nearly two decades. Sector specialists are immersed in industry ecosystems and conduct independent, differentiated research. They collaborate extensively with their teams to construct a high-conviction portfolio of their best ideas. All ideas and position sizes are debated and fully vetted before entry into the portfolio.

These unique sector portfolios are then combined to form a diversified fund. The Fund’s unique portfolio construction process is designed to minimize macro risks by aligning sector allocations with the benchmark. This allows fundamental, bottom-up stock selection within each sector to be the primary driver of risk and returns.

What role can the Research Fund play in an investor’s portfolio?

By investing in the best ideas from each global research sector team, this U.S. large-cap growth fund seeks long-term growth of capital with volatility similar to its peers.

Our analysts seek to identify industry-leading companies with brand power, enduring business models, and strong competitive positioning. This design allows investors to potentially benefit directly from the insights and expertise of Janus Henderson’s equity research team.