Biotech, Bitcoin, Gold ETFs: Top Picks for 2025 According to iShares
Tuesday, Nov 19, 2024 6:35 pm ET
2min read In 2025, iShares anticipates a "lower rate" environment, which could present new opportunities for investors in various sectors. As the backdrop shifts, three potential catalysts are expected to drive thematic investment opportunities: a lower rate environment, rebuilding the physical economy, and technological innovations. This article explores how these factors could impact biotech, bitcoin, and gold ETFs, making them top picks for the coming year.
**Lower Rate Environment: A Tailwind for Biotech**
Lower interest rates can reduce the cost of capital for biotech companies, making borrowing cheaper and allowing them to allocate more resources to research and development (R&D). This presents new potential tailwinds for biotech stocks, as companies can accelerate drug development and innovation. Invesco's Rene Reyna notes that while biotech has remained challenged this year, valuations remain compelling, and artificial-intelligence-enabled drug development continues to act as a potential positive catalyst in the near-to-medium term.
**Bitcoin: Attractive in a Lower Rate Environment**
Lower interest rates can make bitcoin more attractive to investors by reducing the opportunity cost of holding non-yielding assets. This can lead to increased demand and higher prices for bitcoin. Additionally, lower interest rates can make borrowing cheaper, allowing investors to leverage their positions, further driving up bitcoin prices. The iShares Bitcoin Trust ETF (BITO) is expected to benefit from this dynamic, as its performance is closely tied to the price of bitcoin.
**Gold ETFs: Benefiting from Rate Cuts and Weakened Dollar**
Rate cuts by the Federal Reserve can impact the demand and price of gold through several channels. Firstly, lower interest rates reduce the opportunity cost of holding non-yielding assets like gold, making it more attractive to investors. Secondly, rate cuts can weaken the U.S. dollar, which often leads to an increase in gold prices due to gold's inverse correlation with the dollar. Lastly, lower rates can stimulate economic growth, which can boost demand for gold, particularly in emerging markets. Gold ETFs like the SPDR Gold Shares (GLD) are expected to benefit from these dynamics, as their performance is closely tied to the price of gold.
**Rebuilding the Physical Economy and Technological Innovations**
In addition to the lower rate environment, iShares highlights two other potential catalysts driving thematic investment opportunities: rebuilding the physical economy and technological innovations. Rebuilding the physical economy, including infrastructure, manufacturing, and housing, may be better poised to benefit at all levels of government following the election. Technological innovations, particularly in artificial intelligence, are expected to drive meaningful growth in AI capabilities, creating new opportunities for investors.
In conclusion, iShares' 2025 Thematic Outlook identifies biotech, bitcoin, and gold ETFs as top picks for the coming year. A lower rate environment, rebuilding the physical economy, and technological innovations are expected to drive thematic investment opportunities, making these sectors attractive for investors seeking growth and diversification. As always, investors should consider their risk tolerance and consult with financial professionals before making investment decisions.
**Lower Rate Environment: A Tailwind for Biotech**
Lower interest rates can reduce the cost of capital for biotech companies, making borrowing cheaper and allowing them to allocate more resources to research and development (R&D). This presents new potential tailwinds for biotech stocks, as companies can accelerate drug development and innovation. Invesco's Rene Reyna notes that while biotech has remained challenged this year, valuations remain compelling, and artificial-intelligence-enabled drug development continues to act as a potential positive catalyst in the near-to-medium term.
**Bitcoin: Attractive in a Lower Rate Environment**
Lower interest rates can make bitcoin more attractive to investors by reducing the opportunity cost of holding non-yielding assets. This can lead to increased demand and higher prices for bitcoin. Additionally, lower interest rates can make borrowing cheaper, allowing investors to leverage their positions, further driving up bitcoin prices. The iShares Bitcoin Trust ETF (BITO) is expected to benefit from this dynamic, as its performance is closely tied to the price of bitcoin.
**Gold ETFs: Benefiting from Rate Cuts and Weakened Dollar**
Rate cuts by the Federal Reserve can impact the demand and price of gold through several channels. Firstly, lower interest rates reduce the opportunity cost of holding non-yielding assets like gold, making it more attractive to investors. Secondly, rate cuts can weaken the U.S. dollar, which often leads to an increase in gold prices due to gold's inverse correlation with the dollar. Lastly, lower rates can stimulate economic growth, which can boost demand for gold, particularly in emerging markets. Gold ETFs like the SPDR Gold Shares (GLD) are expected to benefit from these dynamics, as their performance is closely tied to the price of gold.
**Rebuilding the Physical Economy and Technological Innovations**
In addition to the lower rate environment, iShares highlights two other potential catalysts driving thematic investment opportunities: rebuilding the physical economy and technological innovations. Rebuilding the physical economy, including infrastructure, manufacturing, and housing, may be better poised to benefit at all levels of government following the election. Technological innovations, particularly in artificial intelligence, are expected to drive meaningful growth in AI capabilities, creating new opportunities for investors.
In conclusion, iShares' 2025 Thematic Outlook identifies biotech, bitcoin, and gold ETFs as top picks for the coming year. A lower rate environment, rebuilding the physical economy, and technological innovations are expected to drive thematic investment opportunities, making these sectors attractive for investors seeking growth and diversification. As always, investors should consider their risk tolerance and consult with financial professionals before making investment decisions.
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