Embracing Change and Opportunity in 2025: Here's Your Investment Guide

In 2025, the global economy is expected to experience a slowdown, with emerging markets confronting significant challenges while the U.S. economy retains its leadership position. Although the fundamental economic outlook for the U.S. continues to indicate a potential soft landing, the pace and direction of policies from the Trump administration will be critical factors influencing economic performance. Tariff measures are particularly noteworthy, as they may create dual pressures of rising inflation and decelerating growth.

The year 2025 is anticipated to be marked by macroeconomic variability, with the U.S.-China policy landscape still lacking a clear trajectory. For investors, 2025 presents a landscape of both transformation and opportunity. Our meticulously crafted investor strategy guide aims to equip you with valuable insights and inspiration for your investment decisions.

⭐ Anticipated Rate Cuts: Projections suggest that the magnitude of interest rate cuts in the U.S. in 2025 may be less aggressive compared to those of other central banks. Given the substantial U.S. fiscal deficit, a more restrictive interest rate environment will be essential to maintain fiscal balance. In contrast, both the Bank of Canada and the European Central Bank may have greater flexibility for significant rate reductions, as the EU and Canada face more pronounced economic downside risks.

⭐ "America First" Policy: The "America First" policy is likely to strengthen domestic economic circulation. While Trump's policies could escalate trade conflicts with multiple countries, the robustness of the U.S. internal consumption cycle will support the economy, thereby bolstering the Dollar Index. This dynamic may exert downward pressure on currencies in non-U.S. economies.

⭐ Continued Capital Inflows: In 2025, the U.S. financial account is expected to continue experiencing capital inflows, driven by the relative strength of the U.S. economy and a favorable risk appetite among investors. Ongoing technological innovation and a stable equity market will further attract global investors to U.S. assets.

Although the Fed introduced a new qualifier on the 'extent and timing' of future rate cuts, it is expected to continue gradually easing to normalize policy in 2025, albeit at a slower pace. Historically, bond assets tend to perform well during easing cycles, with short-duration bonds being particularly sensitive to changes in the federal funds rate. This suggests a relatively clear downward trajectory for interest rates.

While long-duration bond yields are also trending downward, the potential for further declines appears limited due to the current resilience of the U.S. economy. Historically, during periods of Republican control, the 10-year yield has exhibited significant volatility, offering more trading opportunities than consistent trends. The new policies under the Trump administration are likely to continue influencing fluctuations in long-duration bond yields, particularly concerning fiscal policy and subsequent inflation trends within the U.S. economy.

Additionally, the second half of 2025 will represent a critical juncture for the Federal Reserve's monetary policy, and a pause in rate cuts cannot be ruled out. This will largely depend on the effects of Trump's new policies on the economy. Both tariff and immigration policies present dual risks for the U.S. economy, potentially driving inflation while also suppressing economic vitality.

Should the U.S. labor market cool more than anticipated next year, an increase in the unemployment rate could prompt the Federal Reserve to accelerate the pace of rate cuts. In such a scenario, long-duration bonds may experience favorable price appreciation.

Analysts maintain a broadly optimistic outlook for potential gains in the U.S. stock market; however, much of this optimism has already been priced into current market valuations. Consequently, expected returns for U.S. equities in the coming year are likely to be lower than those observed in 2024. Additionally, the potential for expansion in U.S. stock valuations appears limited, with future price increases anticipated to be driven more by earnings growth than by valuation enhancements.

In contrast, market attention is increasingly shifting toward small and mid-cap stocks, which are benefiting from valuation discounts, resilient real GDP growth, and the current cycle of interest rate cuts, as well as favorable policies from the Trump administration. This segment of the market may present more attractive investment opportunities compared to larger-cap stocks.

Tariff policies will be a key variable in 2025, influencing not only markets outside the U.S. but also posing risks to the revenues of American companies engaged in global operations. Investors should remain vigilant regarding the potential for revenue declines among U.S. firms stemming from changes in tariffs and evolving trade dynamics.

As we approach 2025, the AI wave is expected to usher in a new phase characterized by increased software investment, robust revenue growth, and margin expansion. Market attention is likely to shift toward "application and monetization," with key focus areas including AI software, AI agents, large models, public cloud infrastructure, core hardware, and cybersecurity. The application scale of AI agents is projected to be up to ten times that of traditional SaaS applications, with tech giants leading advancements in large models and public cloud services. Additionally, demand for hardware infrastructure is anticipated to rise, along with an expected increase in cybersecurity spending.

However, several risk factors warrant caution. Software companies may be overvalued, and the ultimate winners in this competitive landscape remain uncertain, which could lead to disappointment if valuations are excessively high. Furthermore, the capital expenditures of tech giants may disrupt the valuations of hardware companies, influenced by macroeconomic conditions and challenges related to revenue conversion.

Given these dynamics, investors must carefully assess the potential impacts on their portfolios. Amid the AI surge, it is crucial for investors to selectively identify investment targets, capitalizing on growth opportunities while remaining vigilant about potential risks. By adopting a strategic and informed approach, investors can effectively navigate the evolving AI landscape.

Looking ahead to 2025, the Trump administration has made significant strides in reducing regulatory uncertainty surrounding cryptocurrencies in the U.S., fostering a more optimistic outlook among investors regarding Bitcoin's future. Trump has pledged to establish the U.S. as the "global cryptocurrency capital." This commitment, combined with the ongoing cycle of interest rate cuts and the anticipated Bitcoin halving event, is expected to drive increased demand for Bitcoin. Additionally, the current excitement surrounding Bitcoin ETFs is further integrating Bitcoin into traditional financial investment portfolios, enhancing its legitimacy and accessibility.

However, several risk factors could impact this positive trajectory, including the potential for a global economic recession, inflation risks, and possible adjustments in Federal Reserve policy. Investors should remain vigilant and closely monitor these factors. While the regulatory environment appears favorable and demand for Bitcoin is expected to grow, the broader economic landscape and shifts in investor sentiment will play critical roles in determining Bitcoin's price trajectory in the coming years.

In 2025, gold is expected to encounter several headwinds that could limit its price appreciation. For instance, an anticipated easing of geopolitical tensions may diminish gold's appeal as a safe-haven asset. Additionally, the new Trump administration aims to promote fiscal efficiency, which could lead to reduced government spending and lower deficit levels, thereby exerting downward pressure on gold prices. Furthermore, the rise of digital assets like Bitcoin is drawing investor interest away from gold, a trend that may be further intensified by supportive policies from the Trump administration.

⭐ Potential Safe-Haven Demand: New trade tensions under Trump could reignite safe-haven demand, boosting gold prices even if other conflicts ease. Should the situation in Syria escalate, it may reignite safe-haven demand among investors.

⭐ Fiscal Policy Uncertainties: Trump's fiscal policies, particularly if the fiscal deficit remains high, could degrade the U.S. dollar's creditworthiness and push gold prices up, especially as over 70% of U.S. spending is mandatory.

⭐ Central Banks Keeping Gold Purchases: The People's Bank of China has resumed gold purchases, and increased buying by central banks in emerging markets could further stimulate gold prices.