2025 Outlook: Calamos Global Opportunities Fund

Nick Niziolek, CFA, Dennis Cogan, CFA, Paul Ryndak, CFA, and Kyle Ruge, CFA

Summary Points:

• In 2024, Calamos Global Opportunities returned 24.20%, outperforming the MSCI ACWI Index by more than 600 basis points. These results place CGCIX in the first percentile of its Morningstar peer group for the year.
• Secular growth companies were well represented in the portfolio, balanced with complementary allocations to cyclical growth and defensive names. Across cohorts, we emphasize quality growth fundamentals.
• We expect 2025 to bring considerable disruption, providing us many opportunities.
• The opportunities of artificial intelligence (AI) are evolving rapidly. The universe of beneficiaries is expanding, but this expansion also calls for increased selectivity.
• It is incorrect to assume that “America First” policies translate into “overseas equities lose.” The negative sentiment about overseas equities that immediately followed the presidential election overshot the mark; we expect the global macro environment will be “less bad” than what global equity markets currently reflect.

Entering 2025, global markets face many crossroads, but we look forward to what lies ahead. With new US political leadership likely to challenge the status quo globally and continually evolving secular growth tailwinds, 2025 will likely be another great year to capitalize on disruption.

We welcome this environment. Our investment process is uniquely designed to quickly identify companies across an expansive universe that can benefit most from inflections. We then promptly size up our exposures to these opportunities for the benefit of shareholders.

In this commentary, we examine key questions that will shape markets for 2025 and beyond and our view of the opportunities.

How Will Opportunities within the Artificial Intelligence Ecosystem Evolve?

In 2023, optimism surrounding the AI build-out seemed to be a rising tide that lifted all boats, with a breadth of companies in the semiconductor and semiconductor equipment industries having a very good year. In 2024, investors became more selective. Companies most directly tied to AI performed quite well, but those with greater exposure to non-AI segments of the semiconductor industry, like mobile and autos, underperformed. In 2025, we anticipate the AI tailwind within semiconductors to become even more discerning, but we also expect AI-related opportunities to broaden to other areas, including software, industrials, and consumer-related plays.

In 2025, we anticipate the AI tailwind within semiconductors to become even more discerning, but we also expect AI-related opportunities to broaden to other areas, including software, industrials, and consumer-related plays.

We believe the evolution of the AI theme will resemble the evolution of mobile. In the late 1990s, there were tremendous opportunities for companies involved in the build-out of networks and infrastructure to support individuals and companies who sought to access data anywhere and anytime. By the latter half of the 2000s, the opportunity evolved from telecom infrastructure investments to innovations in handsets and mobile devices that leveraged this technology. By the 2010s, the impact of this technology may have been felt most within the software sector, as companies that could incorporate this technology into their platforms experienced the most significant successes.

AI is likely to follow a similar path, although history has a way of rhyming but never quite repeating. We believe we are still in this cycle’s second or third innings. That said, we are beginning to see an important evolution within this “build-out” phase. Demand is moving toward more customized chips that will benefit a slightly different ecosystem than we saw during the first few innings; much of this new value chain is built around companies based in Asia.

Additionally, during the second half of 2024, we started to see more consistent reports of effective monetization of AI technology within existing software products. In advertising, for example, emerging companies are disrupting incumbents with moats that many believed were impregnable. We anticipate that the pace of this disruption will become more rapid in 2025. This shakeout will play to our strengths, as our dynamic investment process has historically identified emerging opportunities early in their lifecycles.

How Will International Equities React to a Pro-US Growth Agenda?

If we focused on the initial weeks following the election results, the answer would be clear: not well. However, we believe many international equities can flourish longer-term.

We believe what we see is similar to 2016 when many investors’ knee-jerk reaction was to buy regional banks and sell secular growth following the US presidential election. The reality of the next three years was strikingly different from what markets anticipated. The chart below shows the divergence in initial reactions to President Trump’s first election win versus what transpired over the longer term.

In other words, markets were not clairvoyant in those first weeks. There are many reasons to be optimistic that “America First” policies do not necessarily mean “overseas equities lose.” In fact, many of these policies could create headwinds for some of the mega-cap multinational companies that currently dominate traditional US indices.

As we think through the opportunity set for 2025, we focus on understanding what may already be priced into the outlooks for the companies we invest in and where the positive surprises are likely. Given how negative sentiment for non-US equities became immediately following the US election, we believe the risk is to the upside, which means it’s prudent for investors to maintain international exposure.

Our base case for 2025 is that new tariffs are implemented, political posturing runs high, and market volatility increases, but the result will be a global macro environment that is less bad than what international equity markets are currently pricing in.

Our best-case scenario is that trade discussions lead to a “Grand Compromise,” setting the stage for a global rebalancing. In this scenario, economies that have become too dependent on exports rebalance toward consumption, while those driven primarily by consumption make greater investments in infrastructure and manufacturing. In either scenario, we expect adjustments. These adjustments could fuel increased volatility in 2025 but also set the stage for incredible opportunities that we believe we are positioned to capitalize on.

Post-Trump’s 2016 Election, the Longer-Term Market Move Differed from the Initial Reaction

Past performance is no guarantee of future results. Sources: Macrobond and Bloomberg. Regional banks are represented by the SPDR S&P Regional Banking ETF. Secular Growth is represented by the MS Secular Growth Index.

Can Europe Exit Its Malaise?

Over the past decade, the underperformance of European equities relative to the US has been remarkable, with the S&P 500 delivering 13% annual returns over the past decade versus 5% for Europe broadly. As we’ve discussed in previous notes, despite this headwind, there have been and remain attractive bottom-up opportunities in Europe that buck the trend. But from a higher level, one has to wonder what will arrest the trend of suboptimal growth and productivity in recent decades.

Former European Central Bank president and former Italian prime minister Mario Draghi addressed this question in a September report, “The Future of European Competitiveness.” The report outlines several policies to improve Europe’s economic performance, notably structural and regulatory reforms, capital market integration, and an emphasis on investments in technology research and development. These sound reasonable enough on the surface but rely on a greater role and increased power for the European Union, a project whose existence hasn’t exactly been bathed in glory.

Further, the political reality emerging across Europe in recent months reflects an increasing frustration with the EU and a desire to move in a different direction, perhaps inspired by similar changes in direction and policies which we’ve discussed previously in other parts of the world (Headwinds to Tailwinds: An Improved Horizon for Overseas Markets). Described by some as “radical,” increasingly popular parties across Europe are rejecting many of the policies that contributed to the current situation in favor of principles that have historically been favorable for capital formation and growth. Europe faces internal and external adjustments over the next year, and the ride will likely be bumpy. But as always, we will closely monitor the landscape to uncover the opportunities that emerge.

Can Emerging Markets Survive (or Even Thrive) under Trump 2.0?

After seven straight years of emerging market underperformance, many investors may be skeptical that the emerging class can “thrive” under the shadow of “America First” policies, but the economies within this asset class are conditioned to disruption and adjusting to an ever-changing global landscape.

The consensus may be that “Trump 2.0” puts the nail in the coffin for China’s economy and potentially for emerging markets that have historically been levered to global trade. However, it’s important to remember that this isn’t last generation’s emerging markets.

Many emerging market economies are already participating in global trends that provide their economies with greater resilience and growth opportunities, and we expect the ranks of these countries to increase.

China’s dependence on US exports has declined significantly since Trump’s first election victory in 2016. (as shown below). The “reshoring” and “friend-shoring” that have led to this reduced dependence on US exports have benefited a few select emerging market countries. Mexico and India, for example, are notable examples of countries that were seen as allies in the movement of production out of less-friendly countries.

We anticipate these trends will continue and have identified companies directly benefiting from these shifts. However, whether emerging markets will truly thrive in this new environment will depend on whether we see an acceleration in the growth of the emerging market consumer. This significant shift requires coordinated fiscal, monetary, and regulatory policies. That said, we believe the pressure created by the threat of new tariffs will force many governments worldwide, including in China, to make the hard choices and begin implementing programs to rebalance their economies towards consumption.

During the 2000s, “globalization” emerged as a powerful cycle theme. Following the admission of China to the World Trade Organization, emerging market equities were one of the strongest-performing asset classes. Now, as the pendulum moves away from globalization, we believe a shift back to internal drivers for economic growth within many emerging markets could set the stage for a new period of outperformance. At a minimum, we believe this new dynamic increases the benefits of portfolio diversification as we anticipate these economies would become less dependent on US economic growth and could thereby provide balance within global equity allocations.

China’s Shipments to the US Only Account for 15% of Its Total Exports …

… Yet at the Same Time, China’s Overall Trade Surplus Is Ballooning

Source: Gavekal Research/Macrobond, “Impressions From The Road: Part 3, Bitcoin, China, Trump Cabinet, Taiwan,” December 11, 2024. Data shown is 12-month moving averages.

Positioning: Calamos Global Opportunities Fund

Entering 2025, the fund continues to favor secular growth opportunities, which we believe offer the most attractive way to compound returns over the long term. Over the shorter-to-medium term, secular growth companies remain best-positioned to benefit from stable inflation, reasonable growth, and several powerful growth themes.

The fund also maintains exposure to cyclical growth and defensive growth names, reflecting a more dynamic macroeconomic landscape that could shift in the coming quarters. We continue to identify many opportunities to utilize convertible securities, which provide access to growth with lower potential volatility. Overall, the portfolio enters 2025 with more balance by macroeconomic cohort and equity-sensitivity than a year ago.

From a sector standpoint, our largest allocation is to information technology, followed by consumer discretionary and industrials. US companies represent the largest country weighting, although we are underweight in the US relative to the MSCI ACWI Index.