New Year Reboot. Which Assets to Watch in 2025?

We’ve had an eventful 2024. Over 60 countries elected their leaders, the third Bitcoin halving took place, central banks worldwide shifted their monetary policies. Plus, escalating conflicts between Ukraine-Russia and in the Middle East shaped investor sentiment. What factors will drive the financial markets in 2025? Here are some speculations to get your trading strategy 2025-ready.

Trump’s 2nd Innings

Donald Trump beat Kamala Harris to claim the US Presidential seat once again. Keep a close watch on what he does (or says) in his first 100 days in office. Political gurus expect the incoming government to ease regulations around vehicle emissions and renew tax exemptions as the expiry date on the 2017 exemptions closes in. Trump is highly inclined to expand domestic oil output and has threatened to impose up to 100% tariffs and tighten immigration restrictions. Being the leader of the world’s largest and most influential economy, Trump wields significant power to move the markets.

Assets to Watch

US Dollar: Pro-business policies could support economic growth, driving the greenback higher. The Real Economy’s analysts expect these to support a USD surge in 2025 against major trading currencies.

WTI: Higher supply from the US while the OPEC+ extended production cuts will induce volatility in the oil markets. The US Energy Information Administration (EIA) expects WTI and Brent Crude to trade at $71.60 and $76.06 per barrel on average, respectively, in 2025.

Cryptocurrencies: The way policy around creating a strategic Bitcoin reserve unfolds will impact investor sentiment around cryptocurrencies.

Economic Growth

Global economic growth is expected to remain robust in 2025. The OECD has raised its global GDP growth forecast from 3.2% to 3.3% for 2025. As the global economy settles into a safe landing, various industries are set to grow. This growth is expected to encourage investments in the renewable energy and AI sectors.

Assets to Watch

Silver: AI adoption will continue to proliferate in 2025. The rise is expected to significantly boost the demand for silver, a crucial component of chips that drive AI applications. The World Bank predicts that silver prices could surge by 7% in 2025.

Technology Sector: Analysts at Goldman Sachs expect AI investments to reach $200 billion by 2025. These include AI capacity building and application at a wider scale across use cases. This may bolster growth for tech-heavy indices, such as the NADSDAQ 100, which rose 29.7% in 2024. Historically, the index posts strong gains in the year that follows one with gains of around 30%.

Clean Energy: The demand for clean energy to manage AI data centers and transport electrification is forecasted to fuel growth in assets supporting the growth of the renewables industry. These include silver and gold, crucial for efficient circuitry.

Change in Central Bank Policies

Central Banks worldwide initiated monetary easing in 2024. If inflation remains close to target levels, they may further lower interest rates. However, the Bank of Japan (BOJ) turned from dovish to hawkish, raising its rates for the first time since 2007. This could support the demand for the Japanese yen.

Assets to Watch

EUR: Given the pace at which inflation is cooling in the EU, The European Central Bank (ECB) is expected to continue trimming interest rates at 25 bps in every other meeting till the rate reaches 1.5%. This may discourage investing in the euro and the demand glut may weigh on forex valuations.

USD: While the Fed initiated rate cuts, a resilient economy has forced the US central bank to stay cautious. Policymakers predict only two 25 bps rate cuts in 2025. The interest rate differential between the EU and the US may drive the demand for the USD, keeping it elevated in 2025.

JPY: TheBoJ is expected to raise interest rates by 0.5% by the end of the first quarter of 2025. The diverging interest rate policy between the US and Japan may keep the JPY volatile. The dollar-yen cross-rate is forecasted to hit the mid-130s, as interest rate differentials between the two currencies tighten.

Geopolitical Unrest

Heightened Russian “recklessness” and Ukraine’s “not giving up” attitude indicate that the war may continue for longer. Simultaneously, the Israel-Gaza conflict has now engulfed Lebanon, Syria and Iran. Additionally, the last week of December 2024 witnessed an all-out attack in Pakistan by Afghanistan troops. Growing geopolitical tensions may drive investors towards safe havens, supporting their prices. 

USD: The safe haven currency and the Fed’s slow pace of monetary easing are expected to support the US dollar. 

Oil: Threats to the OPEC+ supply chain may increase the demand for oil, supporting energy prices in 2025.

Gold: The demand for the ultimate safe haven may remain elevated in 2025 since geopolitical conflicts are unlikely to de-escalate any time soon.

Trading Strategy for 2025

A diversified trading strategy will ensure exposure to a wide set of assets in 2025, minimising risks from the underperformance of any single asset class. Using contracts for difference (CFDs) can help explore opportunities in rising as well as falling markets. Note that margin trading requires extensive risk management, making it important to set stop loss and take profit limits for every position.

To Sum Up

• Demand for the USD and JPY may increase, supporting their strength.
• The EUR may remain under pressure as the ECB lowers interest rates faster than other major central banks.
• Gold prices may be supported by growing demand in the AI sector and due to geopolitical tensions.
• Silver prices may appreciate as the white metal’s industrial demand increases amid the supply deficits.
• Tech-heavy indices may see an upside as AI and data analytics use penetrates deeper across industries.

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