
‘If you were to ask me what will be the key driving theme of 2025, I would say it will be the after-effects of the U.S. presidential elections’, says Kar Yong Ang, a financial market analyst at Octa broker, adding that Donald Trump’s proposed policies provide more uncertainties than opportunities. Indeed, it is the risk of rising inflation induced by new trade tariffs and immigration policies that separates an optimistic 2025 scenario from a pessimistic one. Before we start analysing the likely scenarios for 2025, let’s first look at the current economic conditions.
Current
situation
Interest
rates
in
most
industrialised
economies
are
currently
75-100
basis
points
(bps)
below
their
recent
peaks.
However,
real
interest
rates
(adjusted
for
inflation)
are
still
positive.
As
Kar
Yong
Ang
explains:
‘If
history
is
any
guidance,
interest
rates
are
still
relatively
high.
In
fact,
I
think
they
are
more
restrictive
than
stimulative
and
will
most
likely
continue
to
go
down
in
2025’.
In
fact,
at
the
time
of
writing,
the
fixed
income
market
(interest
rate
swaps)
was
implying
a
further
50
bps
of
cuts
from
the
Federal
Reserve
(Fed),
100
bps
from
the
European
Central
Bank
(ECB),
50
bps
from
the
Bank
of
Canada
(BoC)
and
50
bps
from
the
Bank
of
England
(BoE).
As
a
result,
the
monetary
policy
divergence
between
the
Fed
and
the
rest
of
the
world
has
pulled
the
U.S.
Dollar
Index
(DXY)
to
a
multi-month
high.
U.S. stocks have performed very well over the past two years. However, the bullish trend in the S&P 500 and NASDAQ is beginning to show signs of exhaustion, especially after the Fed indicated that it intends to slow the pace of future rate cuts.
Gold (XAU) was moving in a very well-defined bullish trend for most of 2024 and set a new all-time high at the end of October. However, the volatility in gold started to increase after the U.S. presidential election brought policy uncertainty. Currently, XAUUSD finds itself in a sideways market, trading range-bound between 2,550 and 2,720, indicating a lack of a clear trend.
Bitcoin (BTC) made headlines in 2024 when its price jumped above $100,000 per coin. A major impulse came in November after Donald Trump’s victory in the U.S. presidential election fuelled hopes of crypto industry deregulation. However, these hopes have not yet been fulfilled, leaving Bitcoin and other crypto coins at risk of a sharp downward correction.
2025
outlook
Macro
and
the
U.S.
dollar
Declining
interest
rates
mean
that
returns
on
cash
(bank
deposits)
in
most
industrialised
economies
will
continue
to
go
down,
prompting
investors
and
traders
to
put
their
money
into
riskier
assets
like
equities
and
cryptocurrencies.
‘Another
important
feature
of
the
current
monetary
policy
outlook
is
that
the
Fed’s
easing
cycle
will
slow
relative
to
the
rest
of
the
world.
It
means
that
the
U.S.
Dollar
Index
[DXY]
will
likely
remain
well-supported
in
2025’,
argues
Kar
Yong
Ang.
However,
a
lot
of
bullish
factors
for
the
U.S.
dollar
are
already
priced
in,
and
the
greenback
has
actually
started
to
look
somewhat
overvalued.
‘I’m
sceptical
about
further
dollar
gains’,
says
Kar
Yong
Ang,
adding
that
dollar
bulls
should
be
very
cautious.
If the U.S. plays hardball and implements blanket tariffs, inflation and even recession risks will rise. In this scenario, investors will rush into safe-haven assets like the U.S. dollar, the Japanese yen, and gold and sell stocks and crypto assets.
Equities
Betting
on
broad-based
growth
in
U.S.
equities
is
dangerous.
Instead,
traders
should
focus
on
specific
industries
and
sectors.
The
main
theme
here
is
the
adoption
and
commercialisation
of
Artificial
Intelligence
(AI).
Companies
that
integrate
AI
into
their
core
operations
and
invest
in
AI
talent
and
infrastructure
will
gain
a
competitive
edge.
Therefore,
tech
companies
are
likely
to
perform
well
in
2025.
By
the
same
token,
the
increased
use
of
AI
and
data
centres
is
boosting
energy
demand,
so
energy
companies
and
utilities
are
also
likely
to
shine
in
2025.
Gold
‘I
expect
gold
to
set
a
new
all-time
high
in
2025.
$3,000
per
ounce
is
not
impossible.
There
are
too
many
risks
heading
our
way
in
2025,
so
there
will
be
plenty
of
demand
for
safe-haven
assets’,
says
Kar
Yong
Ang,
a
financial
market
analyst
at
Octa
broker.
Indeed,
gold
will
continue
to
remain
an
effective
hedge
against
key
political
concerns,
including
government
debt
levels,
inflation,
and
geopolitical
tensions.
Furthermore,
central
banks’
demand
for
gold
has
already
supported
gold
prices
in
2024,
and
there
are
no
reasons
to
expect
this
trend
to
reverse.
Crypto
The
latest
rally
in
crypto
looks
overextended.
It
has
been
driven
by
sentiment
and
embedded
in
forward-looking
hopes.
‘There
is
just
too
much
optimism
in
Bitcoin
right
now.
I
think
there
is
a
risk
of
a
significant
pullback
in
2025.
But
rather
than
betting
on
a
bearish
correction,
I
would
advise
using
it
as
a
buying
opportunity’,
says
Kar
Yong
Ang.
Wrap-up
Overall,
2025
will
be
a
year
of
reckoning
as
the
impact
of
the
U.S.
presidential
elections
unfolds,
determining
the
course
of
future
policy.
In
the
worst-case
scenario
of
an
all-out
trade
war,
global
supply
chains
would
be
severely
disrupted,
leading
to
significant
price
increases
for
consumers,
decreased
business
investment,
and
a
sharp
contraction
in
international
trade.
Under
this
scenario,
U.S.
equities
and
most
other
commodity
prices
would
drop.
However,
should
we
avoid
the
worst-case
scenario,
global
central
banks
will
likely
continue
to
cut
interest
rates,
pulling
stocks
and
crypto
assets
higher.
Our base case scenario is somewhere in the middle. We expect to see a lot of volatility and uncertainty enter the marketplace, but we also expect key players to sort out their differences and find common ground. The AI transformation trend is likely to continue benefiting tech and energy companies. It is highly probable that XAUUSD will establish a new all-time high in 2025, given the likely continued gold purchases by investors and central banks in response to low interest rates, geopolitical risks, and dollar diversification efforts. The greenback will likely reach a major mid-term peak in 2025, so betting on its continuing appreciation is risky.
In case the regulatory outlook for the crypto industry starts to brighten (as seems likely) and the reshuffling of the Securities and Exchange Commission (SEC) yields productive results, Bitcoin, Ethereum, and Solana will probably hit new all-time highs—particularly in the second half of the year. Kar Yong Ang, a financial market analyst at Octa broker, concludes: ‘Fundamentally, the outlook for the global economy is actually positive, but it’s rife with uncertainties and riddled with challenges. I bet Forex volatility in 2025 will be higher than it was in 2024, so there will be plenty of short-term trade opportunities for swing and intraday traders alike’.
Hashtag: #Octa
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1 Comment
I can also recommend Octa; it has the Space section with great trading ideas