From macro realignment to structural transformation, today’s investment landscape is being redrawn by powerful global forces. At Lombard Odier, we believe that understanding these shifts requires more than a financial market snapshots – it calls for clarity on the underlying dynamics that are reshaping market behaviour and portfolio construction.
In this edition of our Must-see charts, we explore three key narratives for investors: the need for greater selectivity in equity exposure amid tighter financial conditions; the growing role of private assets as strategic tools for diversification and directional capital; and the reshaping of energy demand amid the global push for electrification – and the infrastructure required to support it.
Each chart tells a story of adjustment – to volatility, to long-term opportunity, and to the structural shifts that will define the next investment cycle.
Amid rising volatility and falling equity markets, we have maintained overall risk levels in portfolios unchanged while tactically rebalancing regional exposures
Keeping equities at neutral levels
US equities already pricing a recession
S&P 500 behaviour after a 10% correction (since 1929)1
Trade policy uncertainty warrants a more risk-aware approach in global portfolios. Macroeconomics risks have increased. Financial conditions have tightened, and the recent rise in long-dated US Treasury yields has amplified concerns over the equity market outlook. Market sentiment remains vulnerable and investors’ equity positioning has declined sharply. Amid rising volatility and falling equity markets, we have maintained overall risk levels in portfolios unchanged while tactically rebalancing regional exposures.
Read also: Pricing equity risk amid tariff uncertainty
We have raised our exposure to European equities and reduced allocations to Japan, bringing both regions’ markets to a neutral stance. Equity valuations, particularly in the US, have adjusted meaninfully following recent corrections. This repricing may reflect an average recessionary environment, when viewed in a historical context. For this reason, we prefer to remain invested in line with our strategic asset allocation equity weights. In sectors, we continue to favour materials and communication services, while maintaining a cautious outlook on defensive sectors like utilities and consumer staples.
Reframing long-term portfolios: the growing role of private assets
Relative Growth of Global Asset Classes (indexed to 100 in 2010)2
Based on assets under management, in USD trillions
The expansion of private assets over the past decade reflects more than a shift in scale – it signals a structural evolution in how investors approach diversification, return generation and long-term portfolio resilience. Private capital assets under management (AUM) reached USD 14.3 trillion in 2024, up from USD 10 trillion in 2021, underscoring the acceleration of capital flows into private strategies. This growth is not merely performance-driven; it stems from a broader reassessment of portfolio construction in the face of persistent macroeconomic uncertainty and waning confidence in traditional asset class correlations.
Read also: Investing in private assets – the “giant of the real economy”
Private assets have become a vital lever for accessing long-term secular trends. They enable investors to allocate capital to real economy transitions – from the clean energy transition to the expansion of digital infrastructure to healthcare innovation – which remain underrepresented in public markets3. In this context, the private assets opportunity is not simply about capital appreciation, but about purposeful capital allocation into the structural drivers of transformation.
Over time, performance has supported this transition. Between 2000 and 2023, private equity funds delivered a net annualised return of 11.0%, compared to 6.2% for global public equities4. Yet returns are only part of the story. The strategic value of private assets lies in their capacity to diversify portfolios, offering access to non-correlated return streams, reduced volatility, and the potential to capture illiquidity premia in exchange for longer investment horizons.
What was once a tactical allocation is now a strategic imperative. For long-term investors, the question is no longer whether to invest in private assets, but how to do so effectively
Despite their rising influence, private assets still represent a small share of the global investment universe. As of 2023, global fixed income markets stood at USD 140.7 trillion, and global equity market capitalisation totalled USD 115 trillion5. In this context, private capital accounts for less than 10% of total investable assets, leaving significant headroom for future growth and deeper institutional integration.
What was once a tactical allocation is now a strategic imperative. For long-term investors, the question is no longer whether to invest in private assets, but how to do so effectively. Selectivity, rigorous due diligence and trusted partnerships with high-quality managers are essential. When thoughtfully integrated into a diversified portfolio, private assets can help align capital with long-term purpose – and offer the durability and directional clarity needed to navigate structural transformation.
Electrification reshapes global energy demand and investment needs
Global Power Demand (TWh)
The global shift toward electrification is triggering one of the most significant structural transformations in energy markets since the industrial era. Between 2024 and 2035, global electricity demand is projected to rise from approximately 30,000 TWh to nearly 44,000 TWh6 – representing a compound annual growth rate (CAGR) of over 3%. This increase is not only driven by baseline economic growth, but by a step-change in how energy is consumed across industries, households and infrastructure.
The global shift toward electrification is triggering one of the most significant structural transformations in energy markets since the industrial era
Even without further electrification, demand would grow at around 2.1% annually, underpinned by more energy-efficient expansion in China, Europe and the US. However, the electrification of key sectors is expected to add roughly 6,000 TWh of incremental demand by 2035 – lifting the growth rate by an additional 1.3 percentage points. Importantly, the pace of demand growth is expected to accelerate over time, rising by approximately 50 basis points in the 2030–35 period compared to 2025–30.
Four key sectors stand out as major drivers of this shift:
- Electric vehicles: ~2,100 TWh of incremental demand by 2035
- Datacentres and AI infrastructure: ~1,600 TWh
- Heat pumps: ~1,100 TWh
- Green hydrogen production: ~1,100 TWh
These transitions demand vast upgrades in grid infrastructure and electrical equipment – both to meet rising demand and to accommodate more distributed, variable sources of power generation.
Encouragingly, this transformation is unfolding against a backdrop of rapid decarbonisation. Renewable energy is expected to grow at 8% CAGR through to 2035, outpacing demand and allowing a fundamental shift in the composition of the power supply. By 2035, around 70% of global electricity is forecast to come from renewables, while fossil fuels’ share is set to drop from 56% in 2024 to just 31%. Nuclear will continue to play a stable role, contributing roughly 9% of supply, though material growth may only occur with the development of small modular reactors (SMRs).
