By Ahmad Faizal
‘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 analyzing the likely scenarios for 2025, let’s first look at the current economic conditions.
2025 outlook
Macro and the U.S. dollar
Declining interest rates mean that returns on cash (bank deposits) in most industrialized 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 US Dollar Index 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 skeptical 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 USD/JPY, 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 commercialization 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 (BitfinexUSD) 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 XAU/USD 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’.
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