Warren Buffett won’t be taking over from Cathie Wood at ARK Invest – you heard it here first. But there are some other things that are unlikely in 2025 that investors should pay attention to.
While risk is inevitable, working out how to minimise it is key. And that involves working out where it would take something big for things to go wrong.
“Diageo cuts dividend”
Diageo (LSE:DGE) is facing a dual threat of US tariffs and anti-obesity drugs. But I don’t see either of these causing the business to lower its dividend in 2025.
With the tariff issue, I think it’s worth noting that a decent part of the company’s portfolio – including Bulleit, Crown Royal, and Smirnoff is produced in the US. These would be unaffected by taxes on imports.
On the subject of anti-obesity drugs, the majority of users are people who already tend to consume less alcohol anyway. So I’m sceptical of the idea that this is likely to have a significant impact on demand.
The risks can’t be ignored entirely, but the discounted share price means I’m looking to buy the stock in 2025. And I think the chances of the dividend doing any thing but go up in 2025 are extremely remote.
“Rightmove accepts takeover bid”
Earlier this year, REA group made a bid to acquire Rightmove (LSE:RMV). The offer was rejected and I don’t think anyone is going to succeed with a similar proposal in 2025.
There are two reasons for this. The first is the company is doing well by itself – it’s growing strongly and it has a strong balance sheet, meaning there’s nearly no pressure to sell.
The second is the stock isn’t exactly cheap, at a price-to-earnings (P/E) ratio of 27. I’m not buying it at today’s levels and I can’t see anyone paying significantly over this to acquire the firm outright.
The next year will be an interesting one for Rightmove, with the possibility of increased competition from OnTheMarket a potential threat. But as far as the chance of a takeover goes, I don’t think so.
“Interest rates return to Covid-19 levels”
Interest rates going back to 0.1% would almost certainly cause a huge rally in stock prices. But unless there’s another emergency on the scale of the Covid-19 pandemic, I just don’t see it.
Even in that situation, I think the Bank of England might be more cautious than it was last time. The resulting inflation is proving resilient and the last measurement of 2024 revealed CPI rising to 2.6%.
Rising costs are unwelcome, but higher interest rates might be no bad thing for investors. These should weigh on share prices, creating opportunities to earn higher returns over the long term.
Of course, that depends on which stocks investors choose to buy. But companies that can pass on higher costs to customers could make for very attractive investments.
I could be wrong…
With investing, uncertainty is inevitable. Dividends are never guaranteed, strange takeovers happen, and exogenous shocks can cause all kinds of macroeconomic instability.
I could be wrong, but I don’t see Diageo cutting its dividend, Rightmove being acquired, or interest rates going to zero. I think this is about as likely as Warren Buffett taking over a disruptive innovation fund.
