In 2025, U.S. investors are gearing up for a wave of changes that will impact markets as President-elect Donald Trump returns to the White House. Key shifts include tariffs, deregulation, and tax policy, prompting a focus on whether the U.S. economy can maintain its strong performance.
The transition in Washington will have significant implications for stocks, bonds, and currencies in the upcoming year, potentially requiring investors to adjust their portfolios. Forecasts suggest another positive year for stocks, continued strength in the dollar, and rising Treasury yields.
One major theme being closely monitored is U.S. exceptionalism, with expectations for the country’s economic strength to outshine other developed markets. Factors such as consumer spending, a robust labor market, and potential tax reforms could further support U.S. growth and stock sentiment.
Investors are also closely watching the Federal Reserve’s rate-cutting actions in 2025. While expectations of easier monetary policy have boosted stocks, rising Treasury yields following the Fed’s rate cuts present a challenge for the stock market momentum.
The U.S. dollar is expected to maintain its strength, supported by factors such as economic growth, rising Treasury yields, and Trump’s trade policies. However, the potential for increased inflation could complicate the Fed’s interest rate decisions and impact global finance.
Market volatility remains a key concern for investors, as demonstrated by recent fluctuations in U.S. stocks. Uncertainties surrounding the global economy and risks associated with the dollar’s strength could pose challenges for investors seeking further gains in 2025.
The Federal Reserve offered a more conservative outlook on interest-rate cuts than anticipated, coinciding with heightened concerns surrounding a potential government shutdown. While global financial markets appear poised to maintain a state of relative calm as they transition into the new year, analysts caution that a surge in volatility could be imminent.
Experts at BofA Global Research have expressed doubt regarding the likelihood of a recurrence of the historically low levels of stock-market volatility witnessed in 2017 at the outset of President Trump’s first term. Looking ahead, foreign exchange (FX) markets may experience heightened turbulence in the upcoming year, propelled by the intersecting influences of tariffs and decisions made by central banks.
Fredrik Repton, a senior portfolio manager within Neuberger Berman’s global fixed income and currency management teams, foresees foreign exchange as a pivotal shock absorber in financial markets throughout the next year. The speculative fervor that enveloped Bitcoin and related equities in 2024 is expected to persist into the new year, according to strategists.
Steve Sosnick, chief strategist at Interactive Brokers, noted that 2024 had been a standout year for speculation, evolving into a self-perpetuating frenzy in recent weeks. Despite occasional setbacks, notably following the Federal Reserve’s December meeting, investors have demonstrated a willingness to capitalize on market downturns. Sosnick remarked, “When a strategy has proven successful for a significant number of participants over an extended period, there is a reluctance to abandon it.”
Indeed, the results speak for themselves. Bitcoin achieved an all-time high exceeding $100,000 in December amid expectations that President Trump’s re-election would pave the way for a favorable regulatory environment for cryptocurrencies. Concurrently, shares of companies associated with the digital currency market have soared, with software firm and prominent Bitcoin holder MicroStrategy leading the charge with a remarkable 400% surge in valuation over the year.
