2025 investment outlook: bull markets, big moves, and geopolitical gambles
Happy New Year & welcome to #267 weekly newsletter from The Purse.
Quick Take:
After two years of strong U.S. stock performance, 2025 brings a mixed investment landscape. Crypto has entered a bull market akin to 2016/2017, but global markets must contend with Donald Trump’s return to the U.S. presidency, inflation, and shifting interest rates.
What You Need to Know:
The S&P 500 gained 23.8% in 2024, following 2023’s 24.2% rise, marking a two-year increase of 53.2%—the strongest since 1997-1998. The Nasdaq Composite jumped 28.6%, achieving an 84.5% two-year rally, its best since 2019-2020.
In the UK, the FTSE 100 rose 5.8% in 2024, boosted by energy, mining, and financial stocks. Its defensive sectors and high dividends are drawing global interest, especially with the weaker pound making UK equities attractive to international investors.
Europe’s STOXX 600 (+5.9%) and China’s CSI 300 (+14.7%) lagged, reflecting slower recoveries due to energy concerns, weak consumer demand, and real estate struggles.
However, high valuations, inflation, and elevated interest rates are setting a cautious tone for 2025. Investors are eyeing the FTSE 100 as a stable diversification option amid global uncertainties.
Meanwhile, crypto markets are heating up. Bitcoin reached an all-time high of $106,142.51 in mid-December. The resignation of SEC Chair (US) Gary Gensler on January 20, 2025, signals a potential shift toward a more crypto-friendly regulatory environment. Under Gensler, the SEC's aggressive enforcement actions deterred investments.
And Donald Trump’s Strategic Bitcoin Reserve proposal has sparked debate about Bitcoin’s role as a hedge against fiat instability and its potential to bolster U.S. financial dominance.
A Closer Look
Equities
The S&P 500 and Nasdaq Composite led global markets in 2024, fuelled by technology and AI stocks. However, high valuations could constrain further upside in 2025. Europe and China, while positive, remain bogged down by geopolitical and economic challenges such as the war in Ukraine, which continues to disrupt global energy markets and supply chains.
Investors are increasingly eyeing the FTSE 100, where high dividends, a weaker pound, and sector resilience provide a compelling case for diversification.
Crypto bull market
Bitcoin and Ethereum are at the forefront of a new crypto bull market, echoing the explosive 2016/2017 cycle. However, growth is expected to be more tempered this time, with projections of 100-300% gains. Bitcoin price predictions vary from $145,000 or $250,000+ by the end of 2025.
Gensler’s resignation signals a turning point. His tenure was marked by aggressive enforcement actions against crypto firms, creating uncertainty. Now, with a potentially friendlier regulatory framework under the new administration, institutional interest in crypto is likely to grow.
Trump’s Strategic Bitcoin Reserve proposal, while still conceptual, underscores Bitcoin’s growing role as a potential global strategic asset. If adopted, it could reshape financial policies and drive mainstream adoption.
The Flip Side
Equities: High valuations in U.S. markets could limit gains, while Trump’s potential tariffs on European exports may strain sectors like automotive and manufacturing.
Crypto Risks: While regulatory uncertainty is easing, volatility remains a hallmark of the market. If the U.S. adopts a Bitcoin Reserve, competing nations might accelerate the development of their Central Bank Digital Currencies (CBDCs) in response, fragmenting global financial systems.
Geopolitical Risks: The ongoing war in Ukraine and Trump’s unpredictable trade and foreign policies add layers of uncertainty to global markets.
Inflation and Interest Rates: Elevated rates will continue to pressure corporate margins and consumer spending, even as inflation gradually declines.
Key Takeaway
2025 presents a complex landscape that demands strategic agility. U.S. equities, while still promising, require careful sector selection due to high valuations. The FTSE 100 offers stability and diversification opportunities for investors seeking defensive plays.
In crypto, regulatory clarity and institutional adoption are creating a more sustainable bull market. However, Trump’s policies, including the Bitcoin Reserve proposal, could introduce global financial changes whilst being very good news for the crypto industry. Diversification and vigilance remain critical for navigating this multifaceted environment.
We’d love to hear from you.
Get in touch with Jana via the The Purse website or tweet @jointhepurse and janicka. We do no provide investment advice. Please do your own research or speak to a financial adviser.
The Purse Ltd. Copyright 2024 & All Rights Reserved.