Copper, Gold, and Software: Man Group's 2025 Investment Strategy

Man Group, the world's largest publicly traded hedge fund, is keeping a close watch on inflationary trends, with Ed Cole, the head of multistrategy equities, highlighting potential risks. In a recent interview, Cole shared his views on inflation's resurgence and its implications for global markets and investment strategies.

According to Cole, inflation could reaccelerate by 2025. There's sufficient evidence in leading indicators, particularly in housing and other key sectors, to suggest inflationary forces could make a comeback, he said. This presents challenges, especially for high-multiple stocks. Inflationary periods typically erode the performance of equity portfolios without the mitigating effect of bond portfolios.

Cole predicts U.S. inflation could rise to the 3% range by mid-2025, which would be particularly tough for high-multiple stocks. In 2022, we saw high-multiple stocks lose value in inflationary environments. Stocks with adaptive short-term cash flows tend to perform better in such conditions, he added.

Strategic Investment Recommendations

To navigate these challenges, Cole offers a focused investment strategy targeting assets and sectors that can benefit from inflation:

Commodities: Copper and Industrial Metals Cole recommends increasing exposure to core industrial metals like copper, given their extensive applications in electrification and clean energy—both areas poised for significant growth. With the destocking cycle expected to conclude by 2025, companies may re-enter an inventory restocking phase, further boosting demand for these metals.

Gold and Gold Mining Stocks Gold remains a key defensive asset. Central banks have been steadily buying gold, and gold ETFs have witnessed consistent inflows. This trend is expected to continue, providing a hedge against inflation.

Equities: Software over Semiconductors In equities, Cole sees opportunities in technology but favors software over semiconductors. Semiconductors face potential headwinds from ongoing trade disputes, while software spending is expected to rebound strongly in 2025 after a tepid 2024. We like software globally—it aligns well with structural growth themes, Cole noted.

China's Overlooked Potential

Cole also sees untapped opportunities in China. After a significant policy shift in late September, the Chinese government is expected to introduce stronger-than-anticipated measures to stimulate economic growth. Additionally, the possibility of a U.S.-China tariff agreement could further boost market sentiment.