What to expect in 2025 as far as the "New Order" of Economy is concerned?
This post is served with the purpose of bringing some useful information about the global economy
The year 2024 has marked with multiple unforeseen events and dozens of surprising outcomes, making it one of the greatest years figuratively. Since 2025 so far has entered our lives, there are some worth-to-note key themes in the US and the rest of the world during this year collected from multiple institutions in Wall Street, according to Bloomberg:
Base Cases: America First (Again)
Lower rates and pro-growth policies should support a modest global expansion with the US largely leading the way. Risks abound — not least the unpredictability of the new American administration — but solid, not exceptional, returns are the base case for most of Wall Street. Call it cautious optimism
Growth: US Versus the World
The so-called Red Sweep of US government is expected to kick off a pro-business, regulation-light era that gives American activity a boost. Confidence in a European revival is low, while China is seen struggling to manage an ongoing deceleration.
Inflation: Contained, Not Killed
Trump’s potential barriers to trade and aggressive approach to immigration are seen as fresh fuel for inflation, with the Federal Reserve struggling to bring price growth down to target. Still, inflation is generally seen as contained and range-bound both in the US and abroad, compared to recent years.
Monetary Policy: Fewer US Cuts
Trump’s potentially inflationary policies may limit the Fed’s room for maneuver, leading to fewer rate cuts than anticipated and a higher-than-expected terminal rate. The Bank of England faces similar headaches. Europe is expected to lean dovish with several cuts. Japan is the only major bank raising rates.
Fiscal Policy: Cutting Tax and Tape
The sustainability of government spending around the world is a key concern, but no one is expecting countries to rein it in. Any worries about Trump-led tax cuts in the US are cancelled out by optimism over their potential boost to growth.
Tariffs: Tactical Awareness
While everyone agrees new tariffs are on the way, some consider Trump’s tough talk a negotiating tactic, and expect actual trade barriers to be highly targeted and less aggressive than the worst-case scenario. China will bear the brunt.
Stocks: Broadening Out
Wall Street is looking for the stock rally driven by the tech megacaps to broaden. That means a boost for mid- and small-cap equities in the US, which remains most firms’ preferred market, even if it won’t match recent returns. Cheap-looking international companies may offer bargains.
Bonds: All About Income
It’s a mixed bag, with more rates volatility expected and the potential for higher Treasury yields. Still, Wall Street sees fixed income as a key source of income, with relatively attractive yields. Almost everyone says get out of cash.
Credit: Pricey But With Potential
Corporate debt looks priced to perfection, meaning risks are arguably tilted to the downside. But yields are solid, central banks are cutting rates and default risks seen as relatively low. Many firms prefer credit to government bonds as a source of income.
Commodities: Going for Gold
Wall Street is split on whether gold can continue to shine, though bulls see it as a good hedge for the unpredictable macro backdrop. Improving growth and the build out of tech infrastructure (data centers, power plants) could boost base metals. No one is particularly bullish on oil.
Currencies: Dominant Dollar
The dollar is looking pricey, but on balance Wall Street sees more strength for the greenback in the near term as Trump policies come into play. Several institutions are predicting parity with the euro.
Alt. Assets: Private Markets Rule
In an era of falling rates, high public asset valuations and rising dispersion in performance, Wall Street is touting both private markets and hedge funds as potential sources of diversification and returns.
Multi-Asset: Diversify
Optimism for all things US meets richly priced assets and an unpredictable new era. There’s no escaping the gravity of American assets, but Wall Street is also looking for diversification, eying hedges and cautiously seeking opportunities abroad.
AI: Long Live the Revolution
Artificial intelligence is a potential double-driver of returns, as adoption of the technology brings new productivity gains, and as corporations and governments invest heavily in the infrastructure needed to power the revolution.
Risks: Trade War II
A bursting of the AI bubble and bond investors losing patience with profligate governments are among the big Wall Street worries. But the largest by far is that Trump goes harder than expected with tariffs, triggering retaliation and hammering world growth.
Deregulations and the rise of Fintech - Information Technology (AI, Chips,…)
The incoming administration with a new department, DOGE (Department of Government Efficiency) leading by Elon Musk and Vivek Ramaswamy, will likely to drop some ineffective and money-wasted regulations as well as departments. According the Wall Street Journal, some bank regulators, including the FDIC and the CFPB, are the targets of elimination aiming for relaxed regulations, which can create an environment for Fintech and IT sectors to grow.
Taxes
Taxes in Trump’s administration are noticeable as it would be all about negotiation, when high tariffs have been imposed with 60% to China and 25% to Mexico and Canada. It is obvious that China will not sit on it hand when the tariff is applied; therefore, if the retaliation happens, there will be damages for the global economy in general.
Massive Deportation and the US National Debt
Deportation is an important event to watch in 2025 as it will illustrate the process as well as the operation cost and the effects after deporting immigrants.
National Debt was a key theme in 2024 when there were several nations getting in troubles and difficulties with the rise of their debt. As a consequence, with all the taxes and deportation cost, the US is expected to propose some ways to deal with the National Debt uptick.
Cryptocurrency Trend
A run of the new pro-crypto agenda in new administration promises a bright future for cryptocurrency due to the deregulations, creating new inflows of investments to the currency.
Five emerging technologies could see widespread adoption in 2025: Decentralized Digital Identities (DDIs), Oracles, Zero-knowledge Proofs (ZKPs), Synergy with Artificial Intelligence (AI), and Chips and Data Centers.
DDIs could make many other crypto projects feasible by providing a secure and trustworthy way to store personal information.
Oracles and ZKPs could provide trustworthy information online, with oracles promising money if information is wrong and ZKPs proving mathematically that information is true.
The combination of AI and crypto technologies could be far more powerful and socially transformative than either on its own.
The availability of powerful chips, data centers, and electricity will have a major impact on the future direction of crypto and other processing-intensive sectors.
Some other news in this week (Jan 01 - 05)
The MSCI Asia Pacific Index dropped in the first day trading
Countries ranked by optimism for 2025
The number of babies born in an hour
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