Summary

Return expectations for Financials, Healthcare, and Industrials should benefit from AI, climate transition, and deregulation shaping sector dynamics.

Key points

We see three themes shaping sector returns in the coming decade. Artificial intelligence (AI) will support the Information Technology (IT) sector followed by Healthcare, but it is due to extend to others as well. Regarding climate change and geopolitical dynamics, capital expenditure (Capex) will play a more important role than consumption, benefitting Industrials more than the Consumer Staples and Discretionary sectors. Finally, policies supporting deregulation should improve capital efficiency and shareholder returns, to the benefit of Financials. Sector assessment is also important in assessing regional opportunities, as the sector composition of equity markets differs from the sector composition of the economy.