is the Chief Investment Officer for Morningstar’s Investment Management group for the Europe, Middle East and Africa region. He oversees Morningstar’s managed portfolios offering in the region.
Investors are navigating a complex market landscape in 2025, balancing opportunities in commodities, AI-driven equities, and emerging markets against risks from tariffs, inflation, and geopolitical tensions. In conversation with Moneycontrol on the sidelines of Morningstar’s Investment Conference, Mike Coop spoke about the major trends in investing. He is the Chief Investment Officer for Morningstar’s Investment Management group for the Europe, Middle East and Africa region. He oversees Morningstar’s managed portfolios offering in the region.
Edited excerpts:
On rise in demand for commodities
Across global portfolios, interest in commodities has expanded beyond gold to silver, rare earths, and energy-linked materials. Coop attributes the trend to multiple factors: “Precious metals obviously are linked to each other. You have got the rare earths, which are a whole different other story and are tied to AI or tied to the energy transition.” Supply-demand dynamics and strategic considerations are also lifting interest, though he cautions that not all commodities offer predictable returns.
Energy stands out as one of the few commodities with clearer fundamentals. Morningstar recently raised its long-term oil price assumption “because of the demand supply dynamics” he said, calling energy “the one that might look more interesting,” especially after the gold rally.
Despite the momentum, Coop warns against assuming commodities can anchor a portfolio. “I don’t think it is a very reliable source of returns,” he said, adding that it is not something that people should have a high exposure to.
Commodity ETFs, he noted, also come with risks. “The shape of the forward curve can mean that actually you can end up having a negative return for a while,” even if spot prices rise, a risk many investors underestimate. He advises starting by assessing current exposure: “You should start by asking yourself, what do I have, how much exposure do I already have, and does it make sense for me to have more than that?”
On Equities vs Bonds
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The equity-versus-bond decision varies sharply by region. In the US, extra returns from equities are “very low,” while in the UK the gap is “quite a bit bigger,” making valuations more appealing. Overall, Coop says bonds “look better than they normally do,” supported by central banks’ control of inflation and positive real rates. Riskier credit remains unattractive. “You’re not getting rewarded because the spreads are too tight,” he explains.
On opportunities and risks in AI
AI is a major driver in global equity markets. “Most investors already have a pretty sizable exposure,” Coop notes. However, he agrees that there are some risks and warns of over-enthusiasm. Drawing parallels to the 1999 tech cycle, he says, “Episodes of groundbreaking innovations create uncertainty and investors have to be humble about their ability to forecast.”
AI has also become more capital-intensive. Companies that previously grew with minimal investment now “have to allocate a lot of capital,” making them dependent on debt markets or external investors, which adds risk.
On changing views on tariffs
Nearly a year into the tariff cycle, Coop believes markets have a better sense of how these changes affect economies. Tariffs “depress growth” and “push up prices,” but estimating magnitude is difficult. Supply chains are “so complex and globally integrated” that effects are slower and more diffuse than initially assumed. Early reactions were often exaggerated, as investors “marked things down too quickly” without considering company or policymaker responses.
On emerging opportunities
Emerging markets generally offer stronger prospective returns than developed markets, except for the UK, which remains “so undervalued” it stands out globally. Coop highlighted China, Korea, as well as “unloved” markets like Latin America, with Brazil attracting limited attention.
Sector-wise, apart from AI, he pointed to healthcare, which “got undervalued” after sell-offs, and consumer staples, which offer resilience and relative value in uneven growth environments. Small caps globally also appear appealing.
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