The Long View: Best of The Long View 2025 - Investing

Key Concepts

• Emerging Markets: Investing in debt and equity of developing economies, offering diversification and potential for higher returns, but also carrying increased risk.
• Valuation Discrepancies: The current undervaluation of international equities compared to US equities, driven by historical outperformance of the US market and multiple expansion.
• AI & Economic Impact: The potential of Artificial Intelligence as a general-purpose technology to drive productivity growth, with implications for global economic fracturing and investment strategies.
• Private Equity Risks: Concerns about over-allocation to private equity due to inflated valuations, illiquidity, and lack of transparency.
• Long-Term Investing Principles: The importance of staying invested through market cycles, focusing on fundamentals, and avoiding timing the market based on short-term valuation signals.
• Dollar Strength: The impact of a strong US dollar on global investment flows and emerging market performance.
• European Fiscal Shift: The potential for increased growth in Europe due to a change in fiscal policy and increased spending on infrastructure and defense.
• Market Volatility & Diversification: The need for diversification and a measured approach to investing in volatile markets.

The Long View: Best of 2025 – A Comprehensive Summary

This summary details key insights from “The Long View’s” compilation of interviews with portfolio managers, economists, and investment researchers from 2025. The discussions center around global investing, market valuations, the impact of AI, and the risks associated with private equity.

I. Global Investing & Emerging Markets

Hendrickk Duty of 91 highlighted the cyclical nature of investment performance, noting that emerging markets outperformed developed markets for a decade prior to the current period of US dominance. He emphasized the importance of global diversification, particularly in a world increasingly focused on US exceptionalism and a strong dollar. Duty argued that emerging market debt offers a premium over developed market debt, and pointed to Argentina’s recent positive returns as an example of potential gains despite perceived risk. He stressed the growing economic power of countries like China and India, which now rival and surpass G7 economies in terms of purchasing power parity. He noted the success of New Bank in Brazil as an example of innovation originating outside the developed world. He cautioned against solely focusing on the US, despite it being the “ultimate risk-free rate” and a source of great companies.

II. International Equity Valuation

Cliff Asnes of AQR Capital Management presented a strong case for international equities, arguing they are currently undervalued compared to the US market. He attributed the US’s long-term outperformance (over the past quarter-century) primarily (80-85%) to multiple expansion, rather than superior fundamental growth (15-20%). Using the Schiller CAPE ratio as an example, he demonstrated that the US is significantly more expensive relative to global stocks than it was 25 years ago. Asnes suggested that assuming continued US outperformance requires extreme multiple expansion, which he deemed unlikely, advocating for a diversified global portfolio. He characterized a pure value approach to country selection as risky.

III. European Market Dynamics

Vincent Monttoagiori of Fidelity Overseas Fund discussed the strong returns from European markets in early 2025, attributing this to a rotation out of the US and changing conditions within Europe. He noted that the US market was potentially crowded and expensive, while European valuations were more reasonable. Crucially, he highlighted a shift in European fiscal policy, particularly in Germany, towards increased spending on infrastructure, defense, and a reduction in austerity. This fiscal expansion, coupled with rising interest rates, is expected to benefit industrial, building product, and defense sectors. He also pointed to the potential for increased earnings in European banks and insurance companies due to higher rates.

IV. Asian Markets & China’s Investability

Lu Von Sanav, based in Hong Kong, addressed the widespread perception that the Chinese market is “uninvestable.” He acknowledged past underperformance and investor disappointment, but noted that Chinese equities have recently outperformed all other major markets. He attributed the negative sentiment to a history of pedestrian returns despite strong GDP growth, but suggested this may be changing. He emphasized the significant growth potential of the Chinese economy and the emergence of innovative companies.

V. Market Volatility & the Trump Tariff Policy

Jason Zwig, author and Wall Street Journal columnist, discussed the unprecedented nature of the market setbacks prompted by the Trump tariff policy. He noted the lack of historical precedent for such a large-scale, unilateral imposition of tariffs and the difficulty in predicting future outcomes. He advised investors to focus on fundamental questions – “What do I own and why?” – and to avoid panic selling, emphasizing that long-term investors likely purchased their holdings at lower prices.

VI. AI, the Dollar, and Market Divergence

Mike Pile of BlackRock contrasted the bullishness surrounding US equities with the weakness in the US dollar. He attributed the equity market rally to the AI transformation and investor desire for exposure to this theme. However, he noted the unusual behavior of the dollar, which sold off alongside equities and continued to weaken even as stocks recovered. He linked the dollar’s weakness to concerns about US inflation, fiscal trajectory, and changing investor behavior.

VII. Artificial Intelligence as a General Purpose Technology

Neil Shearing, an economist, characterized AI as a “general purpose technology” (GPT) with the potential to deliver significant productivity growth, similar to steam power, electricity, and the internet. He predicted that the full impact of AI will be felt in the second half of the decade and into the 2030s. He emphasized that the US is best positioned to benefit from AI due to its leadership in technology development, diffusion, and economic adaptability. He cautioned that US policies could hinder its ability to capitalize on AI’s potential.

VIII. AI Investment Implications & Valuation

Sudaran Morti of GQG Partners offered a measured outlook on AI, noting the typical hype cycle associated with new technologies. He cautioned that it will take time for AI-native business models to emerge and that most companies are currently focused on using AI to cut costs rather than generate revenue.

Joe Davis, chief economist at Vanguard, predicted that AI could increase productivity growth by 1-1.5 percentage points annually after widespread adoption. He highlighted a surprising pattern: the greatest investment opportunities may emerge outside the technology sector as AI’s benefits spread to other industries, potentially offering better valuations.

IX. Risks in Private Equity

Daniel Rasmusen argued that investors are overallocating to private equity due to an excessive amount of capital chasing a limited number of opportunities. He pointed out that private equity deals primarily involve small companies with higher risk profiles and that valuations are often inflated. Eric Jacobson of Morning Star cautioned investors about the illiquidity and lack of transparency associated with private equity funds, particularly those structured as interval funds or BDCs. He emphasized the potential for unforeseen risks and the importance of understanding the limitations of these investments.

X. Valuation & Long-Term Investing

Barry Rholtz argued that valuation matters less than many investors believe. He demonstrated that attempting to time the market based on valuation signals often leads to missed opportunities. He advocated for a long-term, diversified approach and dollar-cost averaging.

XI. Investing vs. Gambling

John Reinther, in his retirement interview, emphasized the fundamental difference between investing and gambling. He highlighted that equities, over time, tend to outperform inflation, providing a positive real return. He cautioned against chasing short-term gains in speculative assets like Bitcoin, which lack underlying economic value.

Conclusion:

The “Best of 2025” episode of The Long View underscores the importance of a long-term, diversified investment approach. While acknowledging the potential of emerging markets and AI, the interviews consistently emphasize the need for caution, a focus on fundamentals, and an understanding of the risks associated with various asset classes, particularly private equity. The discussions highlight the cyclical nature of markets and the dangers of attempting to time the market based on short-term valuations. Ultimately, the message is one of disciplined investing, recognizing that patience and a well-diversified portfolio are key to long-term success.