Advisers remain bullish on global equities and Aussie small caps, Fidante research reveals

Victor Rodriguez

Global equities and Australian small caps present the greatest opportunity for local investors in the coming six months, but current high valuations and economic headwinds remain front of mind for advisers, according to the inaugural Fidante Adviser Markets Survey released yesterday.

Fidante surveyed over 200 financial advisers on the current opportunities and challenges for investment markets and where they were planning to allocate client funds in the coming six months.

Global equity markets were forecast to deliver the best returns over the coming six months. Close to half of the advisers surveyed (46%) remained bullish on the performance of global equities, with 39% predicting it would be the best performing asset class over the period. One in five advisers plan to increase allocation to global equities in the coming six months.

Victor Rodriguez, Chief Executive, Funds Management, Challenger, said the results reinforce the trend Fidante is seeing with recent strong inflows to this asset class and clear demand for active management to capitalise on the opportunities.

“Led by the US, global equities have driven significant outperformance for several years now, and our research shows that advisers expect this trend to continue as we enter 2025,” Mr Rodriguez said.

“Specifically, AI and healthcare are driving exciting growth potential in global equities, and we expect inflows to reflect this. As we head into 2025, advisers’ optimism highlights the lasting appeal of global equities as a powerful tool to generate returns, even amid economic challenges.”

Despite the bullish outlook, advisers have flagged concerns that global markets may be becoming too expensive. High valuations were the leading concern for 26% of respondents, closely followed by economic slowdown (23%) and geopolitical tensions (22%).

Locally, economic slowdown (44%) and high valuations (27%) were by far the two leading concerns facing Australian equities in the coming six months.

“Inflation is no longer a primary concern and attention is focused on valuations and the potential for an economic slowdown,” Mr Rodriguez said.

The great rotation to small caps

While large caps have driven market highs over the past year, led by the Magnificent Seven in the US, survey respondents are flagging small cap equities as a priority for the coming six months.

Over half of advisers surveyed (51%) are bullish on the outlook for Australian small caps, compared to only 32% bullish on Australian large cap stocks.

In fact, 35% of advisers expect to increase client allocations to Australian small caps, second only to fixed income (41%). Only 9% are planning on increasing allocation to Australian large caps, while 16% plan to decrease allocations.

Evan Reedman, General Manager, Fidante Affiliates, said as markets have been re-setting record highs in recent months, advisers are taking the opportunity to rebalance portfolios.

“Advisers are responding to high valuations in large cap stocks,” Mr Reedman said. “We’re observing a clear shift in focus towards Australian small cap equities, with advisers recognising untapped value in this space after lagged performance in recent years.

“Fidante’s latest Adviser Markets Survey shows that diversification and targeted allocation remains a key priority for advisers with infrastructure (30%), private credit (24%), and private equity (18%) capturing their attention,” he added.

“There is no doubt that advisers are looking for active management in market segments that provide a clear purpose in a portfolio. Whether that be to generate alpha, provide uncorrelated returns, or deliver a consistent income stream,” Mr Reedman said.

Read the full report.