Bipartisan Investment Themes for 2025

This week’s historic elections are finally here, and the polls seem to be about as undecided as ever. There are allegations of manipulation and targeted selection of those being surveyed, and irresponsible pollsters “herding” their numbers, or recycling past results to affect current ones, in order to make it seem like the two candidates were within a point or two margin. The idea that almost every swing state is plus-one or plus-two does not jibe with history and, thus, in this man’s view, cannot be trusted.

If the outcome of the elections is super close, then it could be weeks before a clear winner is determined for the White House, the House of Representatives and the Senate, as they will surely be contested at several levels. This would leave the future of the government in a lurch, since the current Congress wouldn’t convene over to the new Congress until Jan. 3, and the swearing in of the new President and Vice President on Inauguration Day falls on Jan. 20, when the transfer of power to the new administration is complete.

To say that after the elections it will be business as usual is true to some extent because the two-plus months delay occurs before the future balance of power takes office. But I think it is safe to say that the social atmosphere will be unsettling no matter who wins. And whether that atmosphere negatively impacts market sentiment is an unknown. For the time being, a healthy earnings season led by big-cap tech, consumer discretionary, communication services and the financial sector has kept investors engaged in staying long the market.

So, what if the outcome of the balance of power is unfavorable to the near-term whims of Wall Street? There could be more volatility in some sub-sectors that are exposed to more tariff pressure, regulatory pressure, inflationary pressure, budget pressure and tax pressure. Once the power structure is finally in place on Capitol Hill, the market will certainly experience sector rotation at an elevated level. And it will be important for investors to not be complacent during this period that will define the market’s leadership going forward. Some things will stay the same, and some highly likely will not.

However, no matter what happens to the political landscape over the next two-and-a-half months, there are a few all-weather, election-proof themes that should thrive in 2025 and produce potentially portfolio changing profits for investors.

The build out of artificial intelligence (AI) is for real and is as transformational as when the Internet began and went global. If the longshoremen’s strike did not raise a red flag as to how AI is going to impact most every labor-intensive industry, then investors are just not paying attention. AI makes companies leaner, meaner and more profitable. Plain and simple. Leading corporations demand it around the world, or they lose market share. Although the hyperscalers get most of the attention, the biggest money in any high-tech gold rush is in owning the picks-and-shovels companies that build out the infrastructure.

While NVIDIA Corp. (NVDA) is the most substantial name in the AI secular bull market providing the leading chip/software stacks to the data centers, investors can own the engineering construction companies that build the data centers. According to ABI Research, by the end of 2024, there will be 5,709 public data centers worldwide — 5,186 co-location sites and 523 hyperscaler sites. ABI anticipates 8,378 data centers will be in operation by 2030 — an increase of 47%. There are a several stocks to choose from in this data center buildout sub-sector that have a five-year runway of robust growth ahead.

Data centers will consume 8% of U.S. power by 2030, compared with 3% in 2022. U.S. utilities need to invest around $50 billion in new generation capacity just to support data centers alone. Companies that specialize in assisting utility operators expand their grids and capacity are another excellent example of picks-and-shovels plays that are devoid of Washington politics.

For all the amazing attributes and progress AI promises to bring, the dark web and global cybercrime community will become that much more lethal in its operations as well. To this point, it is natural that cybersecurity companies that have the innovative technology to fend off AI-enabled attacks will see their sales flourish. And the U.S. government and other global governments will be some of the largest customers of the leading cybersecurity companies as spending on cybercrime and intrusion accelerates.

Lastly, the three hurricanes that pummeled Florida, Georgia and the Carolinas are causing what will be a multi-year remediation and rebuilding process from the devastation inflicted by hurricanes Debbie, Helene and Milton. The latest total estimated economic damage from the 2024 hurricane season has soared to approach $130 billion (Source: www.usatoday.com). By comparison, Hurricane Katrina caused an estimated $125 billion in damage.

Here too, aside from the two most well-known big-box homebuilding supply store chains, there are publicly traded companies that rebuild roads, bridges, waterways, sewers, harbors and seawalls and are the major suppliers to the big-box retailers of those specific products that will experience huge sales increases for the next two to three years. Flooring, roofing, sheetrock, cement, aggregates, asphalt, lumber, steel and all manner of custom items to reinforce weakened infrastructure.

These are just four areas of what can be considered guaranteed capital investment, regardless of how the elections play out. If the market undergoes some volatility where some of the premium comes out of these picks-and-shovels stocks, investors will have an opportunity invest in these bullish trends at attractive entry points.