2025
MARKET OUTLOOK
GENERAL ADVICE ONLY - THIS RECOMMENDATION IS GENERAL ADVICE ONLY AND DOES
NOT TAKE INTO ACCOUNT YOUR SPECIFIC CIRCUMSTANCES
MARKET OUTLOOK
2025
OVERVIEW
As we look ahead to 2025, the global economic landscape presents a number of challenges and
opportunities. In our annual outlook, we aim to provide a comprehensive analysis of the key
factors influencing financial markets and how to avoid the risks and take advantage of the
opportunities.
1. Economic Outlook
Global Outlook
USA & China - The global engine room
Central banks & navigating Inflation
2. Themes to Watch in 2025
AI Revolution
Powering A.I.
3. Global Equity Market Outlook
US Market - Dominance and Concentration
Australian - A China Story
4. Commodities and Energy Outlook
Precious Metals: A Glittering Future
Industrial Metals: Powering the Future Economy
Energy: Powering Through Transition
5. Risks and Opportunities
Macroeconomic
The Looming Shadow: US Debt Spiral and Its Implications for 2025
Demographic Shifts in Major Economies
BRICS Expansion: A Challenge to Dollar Dominance?
Geopolitical
Taiwan Strait Tensions: A Ticking Time Bomb for Tech
Russia-Ukraine Conflict: Lingering Economic Aftershocks
Middle East Tensions: Oil Markets on Edge
MARKET OUTLOOK
2025
ECONOMIC OUTLOOK
Global Economic Growth Outlook
The International Monetary Fund's October 2024 World Economic Outlook projects global growth to
remain steady at 3.2% in 2024 and 2025, describing it as "stable yet underwhelming".
The IMF warns of potential risks, including spikes in commodity prices due to geopolitical conflicts
and possible impacts from a prolonged contraction in China's property sector.
While India, China, Russia, and the United States are expected to experience economic
contractions between 2024 and 2025, with Russia facing the most significant drop of 2.3
percentage points, the UK, Japan, and Germany are forecasted to see improved growth in 2025.
Conversely, the euro area's growth projections have been downgraded, with Germany expected to
stagnate in 2024.
India's GDP growth is anticipated to moderate from 8.2% in 2023 to 6.5% in 2025
USA & China - The global engine room
While both China and the United States are expected to maintain positive growth in 2025, they
face distinct challenges.
China will need to navigate the impacts of trade tensions and stimulate domestic demand, while the
U.S. will focus on managing inflation and sustaining its economic momentum. The interplay
between these two economic giants will undoubtedly have far-reaching implications for the global
economy in 2025 and beyond.
MARKET OUTLOOK
2025
ECONOMIC OUTLOOK
US Economic Outlook
The macroeconomic outlook for the U.S. economy remains positive, with indicators suggesting a soft
landing. The global economy has weathered the storm of rising interest rates, and inflation is on a
downward trend, allowing central banks to ease their restrictive monetary policies. The U.S.
economic cycle is expected to extend, driven by robust personal consumption and business
investment, with the economy projected to grow at a steady pace into 2025.
Key factors influencing the U.S. economy:
1. Monetary policy: The Federal Reserve is anticipated to reduce its federal funds rate target to a
range of 3.75%-4% by mid-2025, supporting economic activity
2. Inflation: Core inflation is expected to remain above the Fed's 2% target, with projections ranging
from 2.5% to 2.9% by the end of 2025
3. Labor market: The unemployment rate is forecasted to remain stable at around 4%, with
continued job gains albeit at a more moderate pace
4. Consumer spending: Real consumer spending is expected to grow, supported by gains in real
after-tax income and a healthy labor market
5. Business investment: Continued strong investment in technology, research and development,
and infrastructure is anticipated, partly driven by government initiatives
MARKET OUTLOOK
2025
ECONOMIC OUTLOOK
China's Economic Outlook
China's economy is expected to experience moderate growth in 2025, with projections ranging from
3.8% to 4.1% GDP expansion. This represents a slowdown compared to previous years, primarily due
to external pressures and ongoing internal challenges.
In late September 2024, China announced a series of co-ordinated monetary, fiscal and property
easing measures to support its economy. Early signs of improvement are starting to emerge,
investors will be cautious because of excess inventory and cautious buyer expectations in the Real
estate market and the new U.S. administration talking tough on tariffs and geopolitical uncertainties.
However, if China’s economic momentum improves in 2025, we see value opportunities in Chinese
equities.
Key factors influencing China's economy:
1. Trade tensions: The anticipated increase in U.S. tariffs under the Trump administration is likely to
significantly impact China's export sector. This could potentially reduce bilateral trade and create
a drag on economic growth of 1-1.5 percentage points over a 12-month period
2. Stimulus measures: The Chinese government is expected to implement further fiscal support to
counteract economic headwinds. This may include expanding the official budget deficit to around
4% and increasing local government debt quotas to approximately RMB 5 trillion for 2025
3. Property market challenges: The real estate sector continues to face difficulties, with a large
stock of unsold housing that will take time to stabilize
4. Domestic demand: While stimulus measures are being implemented, there has been limited
direct support for households and consumption, which may constrain growth
5. Inflation concerns: Due to downward pressure on prices, inflation is expected to remain low,
potentially leading to deflationary risks
MARKET OUTLOOK
2025
ECONOMIC OUTLOOK
Central Bank Policy
Central banks worldwide are expected to maintain a cautious stance in 2025, with a gradual shift
towards monetary policy normalization. The Federal Reserve and other major central banks are likely
to continue their efforts to balance inflation control with economic growth support.
As inflation pressures ease, there may be scope for policy interest rate reductions, but the overall
stance is expected to remain restrictive in most major economies for some time
Navigating Potentially Persistent Inflation
Global inflation is forecast to continue its steady decline, with projections indicating a decrease from
6.8% in 2023 to 5.9% in 2024 and further down to 4.5% in 2025
Advanced economies are expected to return to their inflation targets sooner than emerging market
and developing economies. However, core inflation is generally projected to decline more gradually,
suggesting persistent underlying price pressures.
As we approach 2025, the global economic landscape is poised to face a formidable challenge: the
persistent spectre of inflation. This economic phenomenon, once considered manageable, now
threatens to reshape market dynamics and investor strategies in the coming year.
Inflationary Pressures: A Multi-Faceted Challenge
The roots of inflation in 2025 are expected to be diverse and deeply entrenched:
Supply Chain Dynamics: Despite years of attempted recalibration, supply chains remain
vulnerable to disruptions, contributing to upward price pressures.
Labor Market Tightness: A transformed workforce landscape continues to empower employees,
driving wage inflation across sectors.
Geopolitical Uncertainties: Ongoing global tensions add volatility to commodity prices and trade
flows, further fuelling inflationary trends.
The Psychology of Inflation
A critical factor in the 2025 outlook is the potential entrenchment of inflationary expectations. As
businesses and consumers increasingly anticipate and plan for rising prices, there's a risk of creating
a self-reinforcing cycle of inflation.
MARKET OUTLOOK
2025
ECONOMIC OUTLOOK
Central Bank Strategies and Market Implications
In response to these challenges, central banks are likely to face a complex policy environment:
Monetary Tightening: Continued efforts to curb inflation may lead to higher interest rates,
impacting borrowing costs and potentially slowing economic growth.
Market Volatility: The delicate balance between inflation control and economic stimulation could
lead to increased market volatility, affecting various asset classes.
Interest Rate Projections
Interest rates are expected to remain higher for longer, with central banks maintaining a cautious
approach to rate cuts. However, as inflation continues to decline, there may be room for gradual
reductions in policy rates, particularly in advanced economies.
The pace and timing of these cuts will largely depend on the evolution of inflation and economic
growth data throughout the year.
If Trump policies see tariffs imposed, this will be inflationary in the short term, which will keep rates
higher and global growth subdued.
FED is cutting into a market that is at record highs with an economy that isn’t in recession. If
inflation were to start ticking higher again then the risk is that the FED gets stagflation
which is very difficult to manage. The Bond vigilantes have already started to throw a
spanner into the works as yields have risen after the first 50 point cut. So Bonds are already
positioning for inflation.
So with that in mind, at the very least we don’t expect a third year of >20% gain for US
equities.
MARKET OUTLOOK
2025
THEMES TO WATCH IN 2025 - A.I.
AI Revolution
Generative AI has emerged as a transformative technology with far-reaching implications across
industries and economies. This powerful form of artificial intelligence, capable of creating new
content using natural language, represents a shift to "Software 3.0" and has sparked significant
investor interest and market enthusiasm.
The economic impact of generative AI is projected to be substantial. It could potentially raise annual
labor productivity growth by around 1.5 percentage points over a 10-year period in developed
economies, translating to a 7% increase in annual global GDP. In the United States, it's estimated to
contribute to a 0.4 percentage point increase in GDP growth over the next decade.
Adoption of generative AI has been rapid, with 65% of organizations now regularly using it, nearly
doubling from just ten months ago.
This surge is accompanied by high expectations, with three-quarters of respondents predicting
significant or disruptive changes in their industries in the coming years.
The technology is already transforming various sectors:
Healthcare: Optimizing personalized treatments and resource management
Drug Discovery: Creating novel molecules for specific protein targets
Scientific Research: Mining literature, brainstorming hypotheses, and designing neural network
architectures
The return on investment (ROI) for generative AI is impressive, with companies seeing an average
ROI of $3.71 for every $1 invested. AI leaders are realizing even higher returns, with an average ROI
of $10.30. Productivity gains are a key driver of this value, with 43% of organizations reporting that
productivity use cases have provided the greatest ROI.
MARKET OUTLOOK
2025
THEMES TO WATCH IN 2025 - A.I.
The adoption of generative AI is not without challenges. Barriers to the tech’s monetization include:
Skills shortage - Lack of both technical and day-to-day AI skills, underscoring the need for
comprehensive training and upskilling programs.
Data readiness - 61% of organizations reporting that their data is not ready for generative AI.
Hype vs Reality - While generative AI has made significant progress, it's important to note that
current AI systems still lack true understanding and reasoning capabilities. Artificial General
Intelligence (AGI) is likely far off, despite current hype and investment. The intelligence of AI
systems is often overstated, as they primarily perform statistical analysis rather than deliberate
reasoning.
May not add up to 100% due to rounding
Source: Centre for the Governance of AI at the University of Oxford
The fear of artificial intelligence (AI) has become increasingly prevalent as the technology rapidly
advances.
Job Displacement - One of the most common fears is job displacement, with many worried that
AI will render human workers obsolete
Scams - Another significant concern is the potential for AI to be used maliciously, such as in the
creation of deepfakes that blur the line between reality and fabrication
Privacy and security - This issue ranks high among AI-related fears, with 73% of people
expressing concern about these risks
Destructive behaviour - The possibility of AI developing destructive behaviours or being
programmed for harmful purposes further fuels anxiety
Despite these fears, it's important to note that many experts believe some concerns, such as AI
enslaving humanity, are unrealistic. As AI continues to evolve, addressing these fears through
responsible development and regulation remains crucial.
The AI thematic will unfold over the
coming decade. However, investors
should be cautious about misjudging
the timing of such a large
technological shift.
MARKET OUTLOOK
2025
THEMES TO WATCH IN 2025 - POWERING A.I.
The AI-driven capex boom, coupled with countries striving to meet ambitious climate goals, will see
demand for metals and minerals essential for renewable technologies could lead to supply chain
bottlenecks and potentially create a new commodity supercycle, affecting costs and implementation
timelines.
Hyperscalers, large-scale cloud service companies, ramped up capital expenditures by over 50% in
2024 to around USD 200 billion, with continued growth expected in the coming years, backed by
significant cash flow generation.
The capex boom is creating a ripple effect across various sectors and regions:
Market beneficiaries:
Data center real estate
Engineering and Construction - Steel (iron ore, coal, limestone), Aluminum
Nuclear Power – Uranium, Copper, Nickel
Renewable Power (Solar and Wind) - Silicon, Copper, Rare earth elements , Aluminum, Steel
Energy Transmission - Copper
Japan, South Korea and Taiwan: AI Semiconductor Supply Chain – Copper, Silver, Palladium,
Platinum, Silicon
Australia is blessed with many ways to invest in this thematic. For those who are looking for an
undervalued Blue Chip with multiple revenue streams in this thematic, look no further than our
own BHP. They have plenty of exposure to Copper and are Australia’s largest Uranium producer
MARKET OUTLOOK
2025
GLOBAL EQUITIES OUTLOOK
The US equity market continues to command a dominant position, trading at a 75-year high
relative to global markets
This concentration is further evidenced by record-breaking capital inflows:
A staggering $55.8 billion in weekly inflows into US equity funds
An unprecedented $44.1 billion directed specifically into large-cap stocks
While this demonstrates strong investor confidence in the US market, it also raises concerns about
market concentration and the potential risks associated with such heavy reliance on a single market.
The gap between the annual earnings
growth of the Magnificent 7 and the
S&P 493 is expected to narrow
Emerging Markets: A Tale of Outflows
In stark contrast to the US market's strength, emerging markets face significant challenges:
$7.5 billion in outflows from emerging markets overall
Chinese equities experiencing a substantial $21.1 billion in outflows over just five weeks
These figures underscore the volatility and potential risks in emerging market investments,
highlighting the need for careful consideration and strategic allocation in these regions.
MARKET OUTLOOK
2025
US EQUITIES OUTLOOK
Near record 2023-2024 performance
2023-2024 has seen the US market deliver one of its best 2 year performances in history,
particularly when you take into account the normal election year equity market performance and
rates actually rising during the first half of the rally.
It is important to realise that these sorts of gains are statistically not likely next year in a historical
context, so investors will need to pare back their expectations for 2025.
Sector-Specific Trends and Opportunities
Technology and AI: Continued Leadership
The technology sector, particularly in areas related to artificial intelligence, is expected to maintain
its strong performance in 2025
Key highlights include:
The semiconductor industry is projected to grow by 9% in 2025
Major tech companies are increasing their AI investments by $11 billion
This continued focus on innovation and technological advancement presents significant
opportunities for investors, albeit with the caveat of potentially high valuations.
Easiest way to get exposure for Aussies is use ETFs. Just understand how much exposure is
concentrated in the Mag 7, so use an equal weighted ETF like QUS if you want broader
exposure
MARKET OUTLOOK
2025
DOMESTIC EQUITIES OUTLOOK
Australian equities
Current Market Position
The S&P/ASX 200 (ASX:AXJO) has demonstrated robust performance, currently trading at
A$8,393.80 with an impressive 19.4% one-year return. The index has recently hit a 52-week high of
A$8,446.40, showcasing a significant recovery from its 52-week low.
Key Economic Drivers
Monetary Policy Outlook: The Reserve Bank of Australia (RBA) is adopting a more accommodative
stance. With the current cash rate at 4.35%, major banks project rate cuts beginning in Q1 2025.
These decisions will hinge on inflation reaching the 2-3% target range.
Labor Market Dynamics: While still robust, the labor market shows signs of cooling. Employment
growth is moderating, with the unemployment rate stable at 4.1%. Wage growth is also showing
signs of moderation.
Consumer Sentiment: Gradual improvement is observed in consumer sentiment, with the
Westpac-Melbourne Institute index at 94.6, representing a 5.3% increase in recent readings.
Sector-Specific Opportunities
Technology Sector: Demonstrating strong momentum and significant growth potential.
Mining & Resources: A mixed outlook with some volatility, influenced by China's economic
policies.
Financial Services: Expected to benefit from potential rate cuts in 2025, with the banking sector
positioning for a changing monetary environment.
Risk Factors to Monitor
External factors such as U.S. economic policy implications and China-Australia trade relations.
Currency considerations, with the AUD/USD trading around the 0.65 level.
Global commodity price movements.
MARKET OUTLOOK
2025
COMMODITIES & ENERGY OUTLOOK
Gold: The Ultimate Safe Haven
Gold is poised for a remarkable ascent in 2025, with prices projected to reach unprecedented
heights of approximately $3,000 per ounce.
This bullish outlook is underpinned by a confluence of factors:
Monetary Policy Shift: Anticipated interest rate cuts are likely to enhance gold's appeal as a non-
yielding asset.
Geopolitical Turbulence: Ongoing global conflicts and tensions continue to drive investors
towards safe-haven assets.
De-dollarization Trend: The erosion of confidence in the US dollar, exacerbated by spiralling US
debt, is prompting a diversification into alternative stores of value. This is reflected in the
increasing Central Bank demand and the emergence of BRICS.
Investors should consider increasing their gold allocations as a hedge against currency devaluation
and economic uncertainty. However, it's crucial to monitor potential volatility triggered by sudden
geopolitical developments or unexpected shifts in monetary policy.
MARKET OUTLOOK
2025
COMMODITIES & ENERGY OUTLOOK
Silver: The Undervalued Gem
Silver presents a compelling investment case for 2025, with price forecasts ranging from $34 to $50
per ounce, and some optimistic projections even suggesting the potential to reach $100 per ounce
under ideal conditions
Key drivers include:
Industrial Demand Surge: The photovoltaic and electronics sectors are expected to significantly
boost silver consumption.
Gold/Silver Ratio Correction: The historically high ratio is predicted to narrow, potentially
amplifying silver's price appreciation relative to gold.
Monetary Policy Impact: Anticipated interest rate cuts could enhance silver's attractiveness as an
investment.
While silver offers substantial upside potential, investors should be mindful of its higher volatility
compared to gold. A balanced approach, considering both industrial demand trends and
macroeconomic factors, is advisable.
Platinum and Palladium: Catalysts for Growth
The platinum group metals are set for divergent paths in 2025:
Platinum: Prices are expected to rise by 13% to an average of $1,070 per ounce, driven by
increased industrial demand and potential supply constraints
Palladium: A modest 3% increase to $1,010 per ounce is anticipated, with some analysts
projecting potential highs of $1,770 by 2025 or 2026.
Both metals face supply uncertainties due to geopolitical tensions involving major producers like
Russia. Investors should closely monitor developments in the automotive sector, particularly the shift
towards electric vehicles, which could significantly impact demand dynamics.
MARKET OUTLOOK
2025
COMMODITIES & ENERGY OUTLOOK
Industrial Metals
Copper: The Red Metal Revolution
Copper emerges as a standout performer in 2025, with prices projected to reach unprecedented
levels. UBS forecasts an average of $10,500 per metric tonne, with some analysts even suggesting
potential highs of $15,000 per tonne.
This exceptional outlook is driven by:
AI and Data Center Boom: The rapid growth of artificial intelligence is creating substantial new
demand.
Green Energy Transition: Renewable energy and electric vehicle sectors are set to double copper
demand over the next decade.
Supply Constraints: Global inventories are at 30-year lows, with production disruptions
exacerbating the tight supply.
Investors should consider copper as a key component of their portfolios, given its critical role in
technological advancement and the energy transition. However, be prepared for potential price
volatility as the market adjusts to these new demand dynamics.
MARKET OUTLOOK
2025
COMMODITIES & ENERGY OUTLOOK
Industrial Metals
Iron Ore: Navigating Uncertain Waters
The iron ore market faces headwinds in 2025, with forecasts suggesting a potential decline in prices:
BMI projects an average price of $100 per tonne.
Some analysts predict a more significant drop to $80 per tonne.
Key factors to watch include China's economic policies, global environmental regulations, and
potential oversupply from major producers. While near-term challenges persist, long-term
urbanization trends in emerging markets could provide support. Investors should approach iron ore
with caution, focusing on cost-efficient producers with strong balance sheets.
Aluminum: Lightweight, Heavy Impact
Aluminum demand is set to grow in 2025, driven by increased consumption in China and global
sustainability initiatives. Goldman Sachs forecasts an average price of $2,700 per tonne.
Key considerations include:
Supply-Demand Balance: A small surplus of 200,000-300,000 tonnes is expected.
Production Growth: Increased output from Indonesia and Russia, alongside resumed capacity in
Latin America.
End-Use Demand: Projected to rise by 3.5% in 2025.
Investors should monitor US-China trade relations and the pace of global economic recovery, as
these factors could significantly impact aluminum's performance.
MARKET OUTLOOK
2025
COMMODITIES & ENERGY OUTLOOK
Energy: Powering Through Transition
Oil and Gas: Volatility Amidst Transformation
The 2025 outlook for oil and gas markets is characterized by conflicting forces:
Geopolitical Tensions: Ongoing Middle East conflicts could potentially disrupt supply and spike
prices.
Chinese Economic Slowdown: Revised projections suggest muted oil demand growth from China.
US Production Policies: Potential "drill baby, drill" policies could increase US output, but may be
tempered by industry focus on fiscal discipline.
Despite these factors, the IEA predicts an oversupply of over 1 million barrels per day in 2025.
Investors should prepare for continued volatility, focusing on companies with robust balance sheets
and diversified energy portfolios.
Nuclear/Uranium: Atomic Renaissance
The nuclear power sector is poised for significant growth in 2025 and beyond:
Nuclear plant output is expected to increase by around 3% in both 2024 and 2025
Long-term projections suggest a doubling of nuclear energy capacity by 2050
Uranium prices are forecast to rise substantially, with targets of $115/lb in 2025 and $135/lb in
2026. The sector's growth is driven by the global energy transition, increasing electricity
demand, and the surge in AI-driven data centers.
Investors should consider exposure to uranium miners and nuclear technology providers, while
remaining aware of regulatory and public perception challenges.
In conclusion, the 2025 commodity market outlook presents a landscape of both opportunity and
complexity. As we navigate this terrain, it's crucial to maintain a diversified approach, stay informed
about global economic and technological trends, and remain agile in the face of potential market
shifts. The commodities that power our present and future economies offer compelling investment
narratives, but require careful analysis and strategic positioning to capitalize on their potential.
MARKET OUTLOOK
2025
MACROECONOMIC RISKS AND OPPORTUNITIES
The Debt Dilemma: Credit rating challenges
The unprecedented levels of US debt have set the stage for a precarious fiscal balancing act in
2025. As the debt-to-GDP ratio continues its upward trajectory, we find ourselves approaching a
potential tipping point where the very foundations of economic stability may be tested.
The government's ability to service this mammoth debt is increasingly coming under scrutiny, with
interest payments projected to consume a staggering 45% of tax revenue.
This fiscal strain is not just a number on a balance sheet; it's a force that could reshape the economic
landscape:
Interest Rate Pressure: The debt burden may force interest rates higher as investors demand
greater compensation for perceived risks.
Investor Confidence: The sustainability of US fiscal policies could face increasing skepticism,
potentially eroding the bedrock of investor trust.
Dollar Dominance: The greenback's global status may waver, introducing new volatility into
international markets.
The Ripple Effect: Beyond Borders
The implications of the US debt spiral extend far beyond its shores. As the lynchpin of the global
financial system, any tremors in US fiscal health send shockwaves across the world:
Global Investment Patterns: International investors may recalibrate their portfolios, potentially
reducing their appetite for US Treasury securities.
Economic Growth Prospects: The crowding out of private investment could stifle innovation and
productivity gains, not just in the US but in economies closely tied to its market.
Policy Responses: The Federal Reserve and other central banks may find themselves navigating
uncharted waters, balancing inflation concerns with the need to support debt-laden economies.
MARKET OUTLOOK
2025
MACROECONOMIC RISKS AND OPPORTUNITIES
Demographic Shifts in Major Economies
Demographic shifts, particularly aging populations in major economies, will significantly influence the
macroeconomic outlook for 2025. As the proportion of elderly citizens increases, labour force
participation rates may decline, potentially reducing overall economic productivity.
This could lead to slower GDP growth and increased pressure on public finances due to higher
healthcare and pension costs. The shrinking working-age population may result in labor shortages in
certain sectors, potentially driving up wages and inflation.
Consumer spending patterns are likely to shift, with increased demand for healthcare services and
age-related products, while other sectors may see reduced demand. Savings rates might decrease
as retirees draw down their assets, potentially impacting capital formation and investment.
Governments may need to implement policies to encourage longer working lives and increased
labour force participation among older adults. Immigration policies might also be reassessed to
address labor shortages. The financial sector may need to adapt, offering new products tailored to
an aging population. These demographic shifts could also lead to changes in housing markets and
urban planning.
Addressing these challenges while maintaining economic growth and social cohesion will be a key
focus for policymakers in the coming years.
MARKET OUTLOOK
2025
MACROECONOMIC RISKS AND OPPORTUNITIES
De-Dollarization
De-dollarization efforts, particularly by China and the BRICS nations, are likely to impact the global
economic landscape in 2025. China's strategy of issuing USD bonds while converting USD reserves
to gold signals a move to reduce dependency on the US dollar.
This approach, combined with the BRICS bloc's push for multi-currency trade arrangements, could
gradually erode the dollar's dominance in international trade and finance.
The development of alternative payment systems like mBridge and China's Cross-Border Interbank
Payment System (CIPS) may facilitate increased use of non-dollar currencies in cross-border
transactions.
However, the process of de-dollarization faces significant challenges, including the dollar's deeply
entrenched role in global finance and trade. The expanded BRICS membership could potentially
accelerate these efforts, but the transition is likely to be gradual
While complete de-dollarization is unlikely in the near term, these trends could lead to a more
multipolar currency system, potentially impacting exchange rates, capital flows, and global economic
power dynamics
BRICS Expansion: A Challenge to Dollar Dominance?
The expanded BRICS alliance, now including Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the
UAE, represents a formidable economic bloc accounting for 37% of global GDP (PPP).
Their concerted efforts towards de-dollarization pose a long-term challenge to US dollar hegemony.
Key developments to watch:
Alternative payment systems bypassing Western sanctions.
Bilateral agreements for trade in local currencies.
Increased gold purchases by central banks.
While the impact of de-dollarization may be gradual, investors should remain alert to potential shifts
in global financial power dynamics. Diversifying currency exposure and considering investments in
emerging markets within the BRICS sphere could offer strategic advantages.
MARKET OUTLOOK
2025
GEOPOLITCAL RISKS
Taiwan Strait Tensions: A Ticking Time Bomb for Tech
The specter of escalating tensions between China and Taiwan looms large over global markets. A
potential Taiwan blockade could trigger a seismic shock to the global tech ecosystem, with TSMC at
its epicenter. Responsible for over 90% of advanced chip production, TSMC's disruption could
reverberate across industries, potentially causing annual revenue losses of up to $1.6 trillion in
sectors heavily reliant on semiconductors.
Investors should brace for potential market volatility:
Global stock markets could experience a sharp 10-15% decline within weeks of a conflict's onset.
The VIX index would likely spike, reflecting heightened market uncertainty.
Tech-heavy indices like NASDAQ may be particularly vulnerable.
Commodity-exporting nations could face headwinds as Chinese demand potentially plummets.
The ripple effects could be far-reaching, potentially reducing global economic output by up to 2.8%
Investors should consider diversifying their portfolios and hedging against tech sector volatility.
MARKET OUTLOOK
2025
GEOPOLITCAL RISKS
Russia-Ukraine Conflict: Lingering Economic Aftershocks
The ongoing conflict continues to cast a long shadow over global markets, with implications
extending far beyond Eastern Europe.
While energy and grain prices have subsided from their 2022 peaks, the risk of resurgence remains,
particularly for Europe's energy security.
Investors should consider:
The potential for renewed commodity price volatility
Opportunities in reconstruction efforts, particularly in Ukraine
Monitoring firms with strong trade or ownership ties to Russia
Middle East Tensions: Oil Markets on Edge
The Middle East conflict has thus far had a contained impact on global markets, but the potential for
escalation remains a key risk factor for 2025. Oil prices have seen a modest 6% increase since the
conflict's onset, reflecting ongoing supply concerns
The World Bank outlines three risk scenarios that investors should be prepared for:
Small disruption: Oil prices could reach $93-$102 per barrel
Medium disruption: Prices may surge to $109-$121 per barrel
Large disruption: A potential spike to $140-$157 per barrel
Such price increases could reignite inflation concerns and impact central banks' monetary policies,
potentially delaying expected interest rate cuts
Trump Policies
Trump 1.0 made the mistake of letting the party continue before bringing out
the medicine. With Trump 2.0 looking to make wholesale changes, it seems he
is not as worried about taking the medicine early in this term. So Trump may be
willing to sacrifice gains in the stock market as he can blame the outgoing
leadership. The market is definitely not pricing in this possibility, so manage
that risk
MARKET OUTLOOK
2025
CONCLUSION
2025 is likely to be a year with many risks and
opportunities, but there will be a need to remain
agile as valuations are historically high
Economic Outlook
Global growth is projected to remain steady at 3.2% in 2024 and 2025.
The U.S. economy shows resilience, with expectations of a soft landing and continued expansion.
China faces challenges in its property market and trade tensions but may see improvement with
stimulus measures.
Themes to Watch
The AI revolution is expected to significantly boost labor productivity and contribute to GDP growth.
Rapid AI adoption brings challenges such as skills shortages and data readiness issues.
The AI-driven capex boom and climate goals are increasing demand for metals and minerals essential
for renewable technologies.
Global Equity Market Outlook
The U.S. equity market continues to dominate, trading at a 75-year high relative to global markets.
Emerging markets face significant outflows, highlighting volatility in these regions.
Technology, materials, and financials sectors show notable momentum.
Commodities and Energy Outlook
Gold is poised for a remarkable ascent, driven by geopolitical turbulence and potential shifts in
monetary policy.
Copper demand is expected to surge due to the AI boom and green energy transition.
The oil market faces transformation, navigating geopolitical tensions and the growing influence of
renewable sources.
Risks and Opportunities
The U.S. debt situation poses potential risks to economic stability and investor confidence.
Demographic shifts in major economies will influence labor markets and economic productivity.
Geopolitical risks, including tensions in the Taiwan Strait and ongoing conflicts, could disrupt markets
and supply chains.
Disclaimer
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formulated in good faith. Our evaluations and projections are grounded in the known facts at the
time of creation and aim to provide a comprehensive view of the anticipated financial landscape in
2024. However, readers should be aware that these projections are estimates and may not fully
materialize.
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