Tough policies of the next president

Trump's plan is to reduce inflation immediately, as part of which he wants to implement aggressive trade policies to protect US industry and bring manufacturing back to the US. This includes raising tariffs on imported goods to a minimum of 10 %, with a particularly tough stance towards China, where it could be as high as 60 %. Migration policy includes mass deportations and strict border controls.[1] These steps, however, could have precisely the opposite effect and lead to a slowdown in the economy, a reduction in the available workforce and an increase in prices and inflation. Last but not least, the new trade policy could cause problems for global supply chains and deepen the trade war, especially between the US and China. On the other hand, the situation would benefit from a stronger dollar. On the energy front, Trump's emphasis on fossil fuels and deregulation could boost the shares of traditional energy companies. The negative stance on climate change caused a sharp drop in renewable energy companies after the election. High demand for data centres, artificial intelligence (AI) and commitments to reducing emissions footprints remain hopeful for these companies [1]. Relaxing regulations in the financial sector and reducing corporate taxes could benefit other sectors as well.[2]

Potential for further rate cuts

The U.S. Federal Reserve (Fed) is planning further rate changes in the new year, but these will be only two rate cuts, for a total of 50 basis points, a full percentage point turnaround from the original four. During the last meeting in December, the bank cut interest rates to 4.25 % - 4.5 %, as expected. Fed Chairman Jerome Powell was of the opinion that the economy was doing well, so their next moves may not be as severe. The Fed's change in approach to future cuts came despite an estimate that GDP will rise to 2.5 % in 2025, while inflation should remain above the 2% target. Adding to the overall complexity are the aforementioned policy changes from Donald Trump and their potential impact, to which Powell noted that the Fed needs to make careful decisions.[3] The European Central Bank (ECB) has a similar approach, having hinted at the possibility of further cuts during its December meeting when it cut its main rate to 3%. This decision is consistent with the ECB's data-driven approach and its commitment to bring inflation down to 2%, with a revised inflation outlook of 2.1% for 2025 [2].[4]

Technology in the new year

In 2025, the technology sector could continue its transformation, shaped in particular by the unabated demand for artificial intelligence. It is increasingly being integrated into industries ranging from computing to healthcare. This is why tech giants such as Nvidia and Meta continue to invest heavily in the technology. However, this raises the question of further return on investment, as the bar has already been set too high and it is becoming increasingly difficult to surpass it in the volume that it was at the beginning. With the proliferation of AI, cybersecurity and ethical use continues to remain a top priority, with organisations expected to invest both money and time in protecting against misuse, according to Forbes. Strained US-China relations and proposed tariffs also pose a threat to the tech sector. Apple, for example, could suffer particularly because of its dependence on China for both revenue and production.[5]In the case of semiconductors, this would disrupt the supply chain, particularly imports from Taiwan. According to the US International Trade Commission, the Asian country will account for up to 44% of US chip imports between 2021 and 2023. Concerns have also led to increased production to ensure supply and warnings from some firms that their sales will decline.[6]

Indexes are expected to rise

The year 2024 represented a growth year for U.S. stock indexes with several records reached. Artificial intelligence, which has boosted the technology sector, and lower interest rates have been major contributors to the strength. These reasons should continue to support momentum in 2025, according to Quartz portal. Added to these are proposed pro-business policies, which the stock market can further benefit from.[7] Several investment banks are also talking about growth, with projections for 2025 ranging from 6,400 to 7,100 points, according to Yahoo Finance [3].[8]

Commodities

The cautious sentiment in the oil market is reflected in the prices for the new year set by analysts in a November Reuters poll. They expect the average price of Brent crude oil to be $74.53 and for WTI crude it should be $70.69 per barrel [4]. Meanwhile, these figures showed a decline in value for the seventh consecutive month. This forecast stems from a combination of factors, including weaker global demand growth and ample supply levels. OPEC+ is expected to maintain its current production curbs until at least the first quarter of 2025. Geopolitical factors, such as tighter US sanctions on Iran or tensions in the Middle East and Ukraine, could support prices in the short term.[9] For gold, the World Gold Council expects that despite record highs and the strongest annual performance in a decade, growth could moderate in 2024. The reason, according to the council, could be a reversal in the Fed's policy of cutting rates, which would dampen demand for the precious metal. On the other hand, however, central bank purchases and potentially higher Chinese demand may still offer upside potential. Ongoing geopolitical tensions and economic uncertainty could drive investors back to gold, preserving its safe-haven status.[10] Estimates suggest that the price of the precious metal could be as high as $3,000 [5].

Conclusion

The year 2025 could be one of significant change and opportunity. Although political reforms and changing monetary policy bring uncertainty, technological innovations, particularly those associated with artificial intelligence, may bring potential. Investors will need to pay close attention to political risks, macroeconomic signals and technology trends. Regardless of the challenges, early adaptation and diversification remain key strategies for successful investing [6].

Adam Austera, Principal Analyst at Ozios

[1,2,3,4,5,6] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate, or on the current economic environment, which may change. Such statements are not guarantees of future performance. They involve risks and other uncertainties that are difficult to predict. Results may differ materially from those expressed or implied by any forward-looking statements.

[1] https://www.bbc.com/news/articles/ced961egp65o

[2] https://finance.yahoo.com/news/whats-ahead-markets-2025-according-100000833.html

[3] https://www.cnbc.com/2024/12/18/fed-rate-decision-december-2024-.html

[4] https://www.morningstar.co.uk/uk/news/258373/ecb-cuts-rates-as-expected-lowers-inflation-growth-outlook-.aspx

[5] https://www.cmswire.com/digital-experience/trade-war-tariffs-how-a-trump-election-would-change-tech/

[6] https://www.forbes.com/sites/timbajarin/2024/12/03/five-major-concerns-for-tech-industry-in-2025/

[7] https://qz.com/2025-stock-market-predictions-analyst-sp500-djia-nasdaq-1851713886

[8] https://finance.yahoo.com/news/wall-street-issues-its-most-bullish-2025-sp-500-target-yet-144625166.html

[9] https://oilprice.com/Latest-Energy-News/World-News/Analysts-Cut-2025-Oil-Price-Forecasts-Again.html

[10] https://www.investopedia.com/gold-set-for-much-more-modest-growth-in-2025-says-world-gold-council-8760468