Financial Markets: Things To Note In 2025

January 14, 2025 15:06

What can we expect in the financial markets in 2025 is probably the question that many market participants look for. With 2024 marked by the continued rise of stock markets across the world and the election of a new US president as Donald Trump is due to replace Joe Biden in the next few days, investors and traders try to forecast what this year may bring to financial markets.

This article will try to give you a brief overview of the financial markets 2025 outlook and which could be the main points of interest for market participants in 2025.

Economists Focus On Expected US Tariffs

The election of Donald Trump as new president after the November 5th presidential elections in the US made clear that markets should be expecting some kind of tariffs imposed on imported products in the US. The president elect has not hidden his plans over new tariffs that he believes could help in strengthening the US economy.

Which countries are likely to face tariffs? There is an ongoing conversation about that among financial analysts who suggest that China, Mexico and Canada could be among the first countries that should be bracing for impact with the eurozone bloc and Vietnam following suit.

A few days ago, a report by Washing Post said that Donald Trump’s financial advisors may be looking to dial back their plans regarding tariffs, focusing only on critical products. However, the president elect denied the report’s validity saying that that the tariff policy would not be pared back.

Analysts suggest that the Trump administration will aim to impose tariffs on all electric battery materials globally in a bid to boost U.S. production while Reuters mentioned that it could cite national security risks to back its decisions.

Commenting on potential new US tariffs, an ING report said: “If President-elect Trump were to implement the full scale of tariffs he suggested in his election campaign, we are looking at a 60% tariff applied to imports from Chinese (potentially raising $260bn in revenue) and 10-20% tariffs on imports from all other countries ($287bn-$573bn).  With household nominal consumer spending amounting to around $20tr in 2024 and we make an assumption that 60% of the tariff is passed onto the consumer, then 60%*647bn = $388bn to 60%*833bn = $500bn. This would mean under the PCE deflator methodology this would lift inflation by between 2-2.5 percentage points, but again, there likely would be some substitution to American made products.”

Will Crypto Rise On The Back Of Trump Support?

Another big topic of conversation will be how the new US administration led by Donald Trump would treat cryptocurrencies. Bitcoin hit new record highs during 2024 with smaller cryptocurrencies also drawing strength. Some years ago, the president elect was against investing in cryptocurrencies.

However, during his election campaign, Trump branded himself as the pro-crypto candidate and promised to launch a strategic national crypto stockpile. The president elect addressed the comments coming from crypto industry members mentioning that he plans to create a bitcoin and crypto presidential advisory council and added that “the rules will be written by people who love your industry, not hate your industry.”

Nevertheless, the New York Digital Investment Group (NYDIG) urged investors not to expect immediate changes to crypto policy when the new president gets inaugurated. NYDIG’s analysts said that forming the right team could take some time and stressed that “the execution of these initiatives may be a matter of priority, with items like geopolitical conflict, the budget and debt ceiling, global trade and tariffs, and immigration perhaps more pressing matters.”

Germany And France Under Financial Pressure

Germany and France are two of the biggest “patients” when it comes to economic growth in the last year. Germany heads for federal parliamentary elections, scheduled on February 23rd after a series of political clashes between members of coalition government. In France, the new government faces backlash as it plans to move forward with severe budget cutting to control the rising deficit.

In Germany, the Federal Statistical Office reported a 5.4% drop in industrial orders between October and November. Retail sales contracted by 0.6% in November as consumers have reduced their spending to cover their other needs. Some market analysts suggest that the German economy may see a light winter recession, especially if stats don’t show some market uplift during Christmas holidays.

In France, the budget deficit has reached 6.1% of gross domestic product (GDP), according to the latest report from the Finance Ministry. The government will try to tackle the problem by targeting a deficit of 5.4% this year with economists noting that the French deficit stopped sliding towards the end of 2024, giving some space for policy adjustments.

Interest Rates On Hold Or Not In 2025?

One thing is for sure: interest rates of major central banks will be a hot topic in 2025 as they have been for the last two years. The Federal Reserve (Fed), the European Central Bank (ECB), the Bank of England (BoE), the Bank of Canada and the Bank of Japan are gearing up to face inflation and the results of their strict monetary policies.

The December 2024 Nonfarm Payrolls employment report showed 256,000 jobs were added to the US economy, well above expectations and the biggest surge in the last eight months. Based on the NFP report, market analysts suggested that the Fed’s governing board may find it difficult to cut interest rates in 2025 the way they had expected.

On the contrary, the ECB seems to be poised to reduce borrowing costs this year trying to support the euro bloc’s economies that struggle. Some ECB’s policymakers however have said that relaxing the bank’s monetary policy should be treated with caution leaving space for different market interpretations.

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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.

Miltos Skemperis
Miltos Skemperis Financial Content Writer

Miltos Skemperis’ background is in journalism and business management. He has worked as a reporter on various TV news channels and newspapers. Miltos has been working as a financial content writer for the last seven years.