If we cast our minds back to 2023 and 2024, a big part of what drove shareholder returns over this time was the expansion valuation multiples.
How does that compare with where we are today?
Learn what Maroun Younes, co-portfolio manager of the Fidelity Global Future Leaders Fund and Active ETF, believes is going to be the primary driver of shareholder returns for 2025.
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I don't think investors would be wise or prudent to expect 2025 to deliver returns similar to 2023 or 2024. And simply because if we look back at ‘23 and ’24, a lot of what drove, or a big part of what drove the shareholder returns over that time frame was the expansion valuation multiples. If you look at where we are today in terms of valuation multiples, particularly in the large cap segment, we're at or near record peaks in terms of valuation multiples. So, therefore the room for those multiples to continue to expand further from this point on is very, very limited. In fact, it could even go the other way. And so, the ability for valuation multiples to, again, do a lot of the heavy lifting going forward is going to be very limited. I think earnings growth is really going to be the primary driver of shareholder returns for this year. Outside of large caps, if you are willing to look at something different there are some interesting pockets outside of that. So small and mid-caps for example, I'd highlight where valuation multiples are nowhere near as demanding or as elevated as what they are in the large cap space. So, investors would do well to potentially look at some of those areas.
