Five key factors analysts think could shape the markets in 2025

After a year of new records on the stock market, 2025 is expected to bring more rallies. But what are the key factors that could move market sentiment in the new year?

ADVERTISEMENT

Global equities reached record highs in 2024, mainly due to generative artificial intelligence and the global economic recovery. 

Building on the positive economic backdrop in 2024, the global economy is expected to keep growing and stocks are expected to keep riding the wave in the new year, according to analysts.

Is the stock market euphoria going to last in 2025?

UK-based investment management company Brooks Macdonald states that easing inflation pressures and decreasing interest rates are expected to drive market performance. 

In the US, markets could also be fuelled by “extension (and possible enhancement) of tax cuts in 2025”, said Chris Crawford, managing partner at Crawford Fund Management. 

Another wealth manager, AJ Bell, also foresees good results on the stock markets, especially in “Big Tech”, if investors choose “the right approach”. 

AJ Bell investment director Russ Mould warned that the rules of the market are changing, thanks to AI, and said that “investors need to consider the words of American industrialist J. Paul Getty, who once asserted that ‘in times of rapid change, experience can be your worst enemy’, because those who are sticking to long-held valuation disciplines are getting left behind as US equities generally, AI-related names more specifically and cryptocurrencies are all on a roll.”

Mould said he expects this trend to continue as long as the cooler inflation, steady growth and lower interest rates develop as hoped. 

Chris Crawford added that Bitcoin’s recent rally is not over. “The increasing mainstream adoption of Bitcoin is another interesting narrative that we expect in the new year as financial advisors and institutions integrate Bitcoin into their portfolios.”

However, he noted that markets need to be aware of the risks, including debt, tariffs and a stronger dollar, which could weigh on trade and growth.

What are the five things that could shape the market?

1 . Sovereign debt

Analysts agree that major economies are grappling with a mounting debt problem that could endanger economic growth. “Addressing these challenges will be crucial for maintaining economic stability in 2025”, Brooks Macdonald said in their outlook for 2025. 

In the UK and France, the debt-to-GDP ratio is almost 100% and 112% respectively. On the other side of the pond, the US is facing 123% and with expectations of it rising further. “President-elect Trump’s policy package could even accelerate growth in government borrowing from what is already a record-high of $36tn (€34.3trn)”, Mould said, adding that the US’s annualised interest bill on that debt already exceeds $1tn, “a sum larger than the defence budget”. 

Unless the US starts cutting expenses or raising income, there could be trouble ahead. The possible scenarios include “either bond yields rise in the face of growing supply, or interest rates stay higher for longer, or the Fed looks to cut rates”, Mould said, adding that “this final scenario may be why gold (and bitcoin, for that matter) are on a roll, as investors seek perceived stores of value”.

2. World trade developments

While US economic growth is expected to impress, President-Elect Donald Trump’s trade policy, including tariffs, may push China and the eurozone, especially Germany, back behind other regions. Tariffs would also fuel inflation in the US, potentially leading the Fed to alter its monetary policy. 

However, analysts are optimistic.

“The possibility of a major trade war may prove to be overstated, as the implementation of tariffs by the Trump administration is expected to remain targeted and limited”, Crawford said.

ADVERTISEMENT

“Trump talked loudly and carried a big stick on the subject of tariffs during his first term, but he only really wielded the stick at China”, Mould said. “We may see the same again this time around given Trump’s propensity to seek a deal.”

Potential global trade tensions between the US and China could bring about disruption to global supply chains, noted Brooks Macdonald’s outlook.

3. Watch the dollar

US tariffs could lower the US trade deficit and that would result in fewer dollars leaving the country. According to AJ Bell: “If they produce America’s first trade surplus since 1975, dollars will actively flow back into the US.” Due to the dollar’s status as the world’s reserve currency, used across the global economy and financial markets, having less of them could lead to “global liquidity drying up, with potentially deleterious consequences”, Mould highlighted.

Having fewer dollars, so essentially a strong US currency, would also increase the debt servicing cost of emerging countries that often borrow in this currency. 

ADVERTISEMENT

4. Are the Magnificent Seven going to keep the ‘magic’?

In the stock market, the so-called Magnificent Seven made up of Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla have made a lot of money this year. However, they may not be fuelled by the same level of enthusiasm in the new year as in 2024.

“This year’s average 65% gain across the septet leaves them with an aggregate market capitalisation of $18tn, or 35% of the S&P 500,” Mould said, adding that an unexpected recession could pose a challenge for these companies, as well as sustained inflation and higher than expected rates. “Only a perfect middle path may do to justify their lofty valuations,” Mould added.

Crawford believes that: “The dominance of the Magnificent 7 is expected to fade as embedded extreme expectations, and the sheer size of these companies, constrain performance.” 

He believes: “Small and mid-cap equities, which have fallen behind in the last few years, should grow and attract more attention from investors.”

ADVERTISEMENT

5. Mergers and acquisitions are on the horizon in 2025

“The new year will usher in an M&A boom, sparked by the relaxing of government regulations and willing credit markets”, Crawford also noted – and he predicts that: “This will be the most significant deal wave in over a decade, creating opportunities for investors positioned in sectors that are ready for consolidation.”

IPOs may also sweep the floor, according to the Crawford Fund Management. 

“Conditions are favourable for the new issues market to reopen after a long drought and expect a wave of IPOs to hit the equity market in 2025 and to be well received with potentially generous valuations.”

Disclaimer: This information does not constitute financial advice, always do your own research on top to ensure it’s right for your specific circumstances. Also remember, we are a journalistic website and aim to provide the best guides, tips and advice from experts. If you rely on the information on this page, then you do so entirely at your own risk.

ADVERTISEMENT

Source link

Visited 1 times, 1 visit(s) today

Related Article

Ernakulam rural police examine mobile phones seized from counterfeit currency case accused | Kochi News

Kochi: Ernakulam rural police have intensified investigation into a suspected counterfeit currency network after recovering three mobile phones from a 62-year-old man who was arrested for circulating fake notes. The accused, identified as Abdul Rasheed of Pathanapuram in Kollam, was taken into custody by Kuruppampadi police on Thursday.Officers said the phones were also examined by

iQOO 15 unboxed ahead of launch, charging speed downgrade confirmed

iQOO will unveil the iQOO 15 on October 20 at an event in Shenzhen, China. The brand recently shared some pictures of the iQOO 15, revealing its color options and giving us a fair idea of the smartphone’s design. Now, the iQOO 15 has appeared in an unboxing video posted by AnTuTu on Weibo, which

When It Helps And When It Hurts

If you’ve ever wondered why some people sip espresso like water while others end up wired at 3 am, you’re not alone. Coffee divides people – sometimes within the same household – into those who thrive on it and those who suffer the consequences. Mic the Vegan, a popular science communicator with a Master of

iPhone 17 vs. iPhone Air Battery Test Showdown: I Just Crowned A New Winner

Key takeaways: The iPhone 17 Pro Max has outstanding battery life that easily lasts all day with charge to spare. Our exclusive lab data shows you don’t need to pay over a grand for excellent battery life. The $829 iPhone 17’s battery lasts just as long as the $1,099 iPhone 17 Pro. The ultrathin iPhone

The latest mobile hotspots deliver 5G to almost any device while sparing your phone’s battery – here’s why businesses won’t want to snooze on the newest technology

Qualcomm’s recent announcement of the Snapdragon X2 Elite shows that the company continues to strengthen its push to gain a foothold in Windows PCs., particularly as Nvidia pumps investment into a reeling Intel. The X2 Elite outperforms Qualcomm’s previous PC offerings in all the important key metrics. But there’s one feature from the company’s early

Oppo Find X9 series coming to India in November

During the annual India Mobile Congress this year, Oppo and MediaTek announced that the Find X9 series will be the first smartphone lineup to feature MediaTek’s latest and greatest Dimensity 9500 SoC, which was announced in late September. That bit isn’t particularly new information, though. The interesting bit about the announcement is that the Find

Headlines from the Coffee Industry

Our recurring round-up of the latest specialty-coffee industry news. FROM STAFF REPORTS Featured image by Joshua Earle World Coffee Research Recognized in TIME Magazine’s Best Inventions of 2025 World Coffee Research has announced that their Innovea Global Coffee Breeding Network was named a Best Invention of 2025 by TIME Magazine. Launched in 2022, Innovea a

Domestic Violence Awareness: Waukesha coffee shops help spread word

WAUKESHA, Wis. – Coffee is serving as a conversation starter in Waukesha County during Domestic Violence Awareness Month.  Conversation starter What we know: It is a sobering reminder every October from The Women’s Center. Seventy-one people have been killed in Waukesha County acts of domestic violence since 1992.  Advocacy specialist Mo Dempsey said there was

Samsung Galaxy Tab S11 Ultra review

Introduction The Galaxy Tab S11 flagship series premiered at Berlin’s IFA this year and it is available in two sizes – the 11″ Tab S11 and the 14.6″ Tab S11 Ultra. Today, we will explore the larger of these slates, the most premium Samsung tablet right now – the Galaxy Tab S11 Ultra. Thin and

The Best Stovetop Espresso Maker for Design Enthusiasts (2025)

As you know, coffee is life in Italy. But you can still have la dolce vita stateside with the best stovetop espresso maker. Unlike espresso machines that can take up precious counter space, this type of model is typically the size of a tea kettle. The secret to making a great Italian coffee is rooted

Honor’s new teaser details the Magic8 Pro’s telephoto camera

Honor has released some new teasers about its upcoming Magic8 Pro, and specifically about its 200 MP telephoto camera. This will have a 1/1.4″ type sensor, the AIMAGE Honor Nox Engine, a large f/2.6 aperture, and, according to the brand, the industry’s first CIPA 5.5-stop image stabilization. This should handle hand shaking without issue as

Lawmakers Introduce Bipartisan Bill to Prohibit Student Cellphone Use in Pennsylvania Schools

Legislation responds to alarming declines in youth mental health, academic achievement, and social engagement.  HARRISBURG – Citing the steep decline in youth mental health and academic performance during the past decade, Sens. Devlin Robinson (R-37), Vince Hughes (D-7), and Steve Santarsiero (D-10) today announced the introduction of bipartisan legislation requiring Pennsylvania schools to adopt policies

0
Would love your thoughts, please comment.x
()
x