MW Forget the 'Magnificent Seven.' Here are the biggest investment themes in the next five years.

By Barbara Kollmeyer

Value stocks, gold, healthcare, cybersecurity and other ideas from Bank of America

In five years, the investment landscape is likely to look much less one-sided. The "Magnificent Seven" stocks will no longer dominate, and value stocks will have a chance to shine as money heads to gold and crypto.

That's according to BofA Securities, whose strategists have come up with a top-10 list of the biggest themes to kick off the next decade. With that, they are also offering the many ways investors can get ahead of those themes with investment recommendations.

"We think micro themes will dominate macro in the coming 5 years: tech transforming our economy against a backdrop of populism, AI resource bottlenecks, generational shifts in power and wealth, and a return of government fiscal discipline," says a team of strategists led by Haim Israel and Michael Hartnett.

So here we go:

-- "Technology is eating the world." The strategists see a new phase of tech in the next five years, minimizing human intervention and powered by AI. With that, "we will watch technology prices plummet." Watch for agentic AI models that can act autonomously, along with embodied AI - robots that can interact with their surroundings. The beneficiaries will be tech hardware, semiconductors, telecom equipment and cloud companies.

-- The monopoly of Magnificent Seven stocks will end. The next five years will see that group facing more taxation and regulation - losing their edge as the benefits of AI broaden out. One big risk this year is a full-blown bubble for that group, especially if the Fed comes back to a rate-cutting cycle, say the strategists. Investors would want exposure to equal-weighed equity indexes XX:SP500EW , value and international stocks, the strategists said.

-- Digital insecurity will rise as privacy wanes. Given human dependence on technology, privacy is no more, with cybercrime the "digital black swan for 2030," and potentially 10 deepfakes for every person in the world. This theme is all about investing in cybersecurity and cyber insurance, says Bank of America.

-- More of everything. Exponential tech growth needs more resources - infrastructure, computing, bandwidth, human capital, energy, water, skills and data centers. The sectors that will benefit the most will likely be chip companies, tech hardware, data centers, energy, grid technology, energy storage, communications networks, utilities and mining.

-- The rebuild of everything. Some $94 trillion in funding by 2040 will be needed to rebuild aging assets and infrastructure that needs expansion. Infrastructure, materials, industrials, automation, utilities, building productions construction and transportation sectors will all benefit.

-- Bonds baby. Wave goodbye to the "anything-but-bonds" theme - a powerful Wall Street trend for the past five years - as an era of government fiscal excess ends. Put money in bonds, real-estate investment trusts, commercial real estate, small-cap stocks, emerging markets and banks, say the strategists.

-- Populism. With incumbents out in 26 of 32 elections in 2024, less globalization, immigration and central bank independence are the future. The beneficiaries? Treasury inflation-protected securities, gold, crypto, consumer stocks that cater to Main Street and defense stocks in Europe and Asia.

-- War & Peace. Global trade and tech protectionism will continue with America. But the U.S. will force resolutions to the Russia-Ukraine war and Middle East conflicts, which will be bullish for Europe. Gold and crypto, commodities, China and European stocks, and space exploration will be beneficiaries.

-- The rise of zoomers and boomers. Look for baby boomers to command 80% of the world's GDP and that group plus Gen Z to spend around $28 trillion combined in 2030. For the aging cohort, invest in healthcare, aged care and healthcare real-estate investment trusts, along with financials such as life insurance and consumer - travel, beauty and leisure. As for Gen Z, new media, Big Tech, consumer themes such as luxury, leisure, wellness beauty, pets, along with educational technology and fintech will all benefit.

-- Health is the new wealth. By 2030, the global health-worker shortage will reach 10 million, as aging populations stretch resources. This will benefit pharma/biotech and consumer sectors, such as nutrition, beauty and sports.

-Barbara Kollmeyer

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January 24, 2025 10:02 ET (15:02 GMT)

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