However, according to Octa Broker, the outlook for the global economy is uneven and mixed, ‘full of uncertainties and full of challenges’. Traders are therefore advised to adopt a cautious attitude. In this article, Octa broker looks at the key economic and political developments that will shape the coming year and provides exclusive guidance on their potential impact on different asset classes.
“If you were to ask me what the most important theme of 2025 will be, I would say it will be the aftermath of the US presidential election.”said Kar Yong Ang, a financial market analyst at Octa Broker, adding that Donald Trump’s proposed policies present more uncertainties than opportunities. Indeed, it is the risk of rising inflation due to new trade tariffs and immigration policies that distinguishes an optimistic 2025 scenario from a pessimistic one. Before analyzing the likely scenarios for 2025, let’s first look at the current economic conditions.
Current situation
Interest rates in most industrialized economies are currently 75 to 100 basis points (bps) below their recent peaks. However, the real interest rate (adjusted for inflation) is still positive. As Kar Yong Ang explains: “If history is any guide, interest rates are still relatively high. In fact, I think they are more restrictive than stimulative and will most likely continue to decline through 2025.”.
At the time of writing, the fixed income market (interest rate swaps) implied another 50 basis points of cuts from the Federal Reserve (Fed), 100 basis points from the European Central Bank (ECB), 50 basis points from the Bank of Canada (BoC) and 50 basis points of the Bank of England (BoE). As a result, the divergence in monetary policy between the Fed and the rest of the world has pulled the US Dollar Index (DXY) to its highest level in several months.
US stocks have performed very well over the past two years. However, the bullish trend in the S&P 500 and NASDAQ is starting to show signs of exhaustion, especially after the Fed signaled that it plans to slow the pace of future rate cuts.
Gold (XAU) was in a very well-defined bullish trend for most of 2024, setting a new all-time high in late October. However, volatility in gold started to increase after the US presidential election brought policy uncertainty. Currently, XAUUSD is in a sideways market, with a trading range between 2,550 and 2,720, indicating the lack of a clear trend.
Bitcoin (BTC) made headlines in 2024 when its price rose above $100,000 per coin. A big boost came in November after Donald Trump’s victory in the US presidential election fueled hopes for deregulation of the crypto industry. However, this hope has not yet been fulfilled, leaving Bitcoin and other cryptocurrencies at risk of a sharp downward correction.
Outlook for 2025
Macro and the US dollar
Falling interest rates mean that returns on cash (bank deposits) will continue to fall in most industrialized economies, prompting investors and traders to put their money into riskier assets such as stocks and cryptocurrencies. “Another key 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 the US Dollar Index [DXY] is likely to remain well supported into 2025argues Kar Yong Ang. However, many bullish factors for the US dollar are already priced in, and the dollar is even starting to look somewhat overvalued. ‘I am skeptical about further appreciation of the dollar’says Kar Yong Ang, adding that dollar bulls need to be very careful.
If the US cracks down and imposes blanket tariffs, inflation and even recession risks will increase. In this scenario, investors will rush to safe havens such as the US dollar, Japanese yen and gold and sell stocks and crypto assets.
Shares
It’s dangerous to bet on broad-based growth in US stocks. 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 businesses and invest in AI talent and infrastructure will gain a competitive advantage. Therefore, technology companies are likely to perform well in 2025. At the same time, the increased use of AI and data centers is driving energy demand, meaning energy companies and utilities are also likely to shine in 2025.
Gold
“I expect gold to reach a new all-time high in 2025. $3,000 an ounce is not impossible. There will be too many risks facing us in 2025, so there will be plenty of demand for safe haven assets.”said Kar Yong Ang, a financial market analyst at Octa Broker. Indeed, gold will remain an effective hedge against key political concerns, including sovereign debt, inflation and geopolitical tensions. Moreover, central bank demand for gold has already supported the gold price in 2024, and there are no reasons to expect this trend to reverse.
Crypto
The latest rally in crypto seems overextended. It is driven by sentiment and embedded in forward-looking hope. “There is just too much optimism in Bitcoin 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 this as a buying opportunity’says Kar Yong Ang.
Wrapping up
Overall, 2025 will be a year of reckoning as the impact of the US presidential election will unfold and determine 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, reduced business investment and a sharp contraction in international trade. In this scenario, US stocks and most other commodity prices would fall. However, if we avoid the worst-case scenario, global central banks will likely continue cutting rates, sending stocks and crypto assets higher.
Our base case is somewhere in the middle. We expect there will be a lot of volatility and uncertainty in the market, but we also expect the key players to settle their differences and find common ground. The trend of AI transformation is likely to continue to benefit technology and energy companies. It is highly likely that XAUUSD will reach 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 dollar is likely to reach a major medium-term peak in 2025, so betting on continued appreciation is risky.
In the event that the regulatory outlook for the crypto industry begins to improve (as seems likely) and the Securities and Exchange Commission (SEC) reshuffle yields productive results, Bitcoin, Ethereum and Solana are likely to reach new all-time highs – especially in the US . 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 is full of uncertainties and challenges. I bet forex volatility will be higher in 2025 than in 2024, so there will be plenty of short-term trading opportunities for both swing and intraday traders.”.
About Octa
Octa is an international broker offering online trading services worldwide since 2011. It offers commission-free access to financial markets and a variety of services used by customers from 180 countries who have opened more than 52 million trading accounts. To help its clients achieve their investment goals, Octa offers free educational webinars, articles and analytical tools.
The company is involved in an extensive network of charitable and humanitarian initiatives, including improving education infrastructure and short-term aid projects to support local communities.
Since its inception, Octa has won more than 90 awards, including the ‘Most Reliable Broker Global 2024’ award from Global Forex Awards and the ‘Best Mobile Trading Platform 2024’ award from Global Brand Magazine.