🏪 Markets in 2025: Brace for the Unexpected!

Good Morning!

The first trading day of 2025 has markets across Asia hitting the skids, with investors getting a not-so-gentle reminder that uncertainty is still very much in the driver's seat. Chinese equities took a particularly rough tumble, sliding more than 1.4% as Trump's proposed 60% tariffs on Chinese imports loom large. Meanwhile, the dollar's flexing its muscles, pushing the yen to five-month lows and keeping other currencies on their back foot. Between a hawkish Fed outlook (just two rate cuts likely this year) and Trump's impending inauguration on January 20th, markets seem to be bracing for what could be a wild ride ahead.

In today’s email:

• 2025: Market outlook balances optimism against heightened risks

• Bitcoin: Stole the show in 2024!

• China: Intensifies crypto clampdown

• Gold: Looks set to continue higher in 2025!

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THE BIG IDEA

2025's market outlook balances optimism against heightened risks, with Trump's policies, fiscal expansion, and China tensions shaping the investment landscape

The markets are serving up a fascinating recipe for 2025, and we've got to say, it's looking spicier than your average year. While our base case remains surprisingly upbeat (think soft landing with a side of solid growth), we're also eyeing some seriously chunky risk factors that could flip the script.

Here's what's cooking: Trump's return is already baked into most predictions, but it's the potential for across-the-board tariffs that's keeping risk managers up at night. The Chinese market's getting the jitters, though Beijing's got some cards left to play. Meanwhile, the dollar's flexing its muscles, backed by Uncle Sam's relatively robust growth and the Fed's cautious stance on rate cuts.

Europe and emerging markets?

They're looking at a tougher climb, especially with Trump's trade agenda looming over them like a storm cloud. Oil's expected to play it cool in a range-bound channel, though geopolitical fireworks could always shake things up.

The real plot twist might come from fiscal policy – with the U.S. joining Japan, UK, and various emerging markets in the spending spree, we could be looking at higher terminal rates than many expect. And let's talk about those U.S. equity valuations – they're stretched tighter than a drum, which could mean some nasty surprises when the music eventually stops.

Smart money's playing it cool though: diversifying portfolios, keeping some powder dry in Treasuries and TIPS, and maintaining a friendly relationship with the dollar. Think of it as wearing both sunscreen and carrying an umbrella – 2025's weather forecast is anything but certain.

MARKETS AT A GLANCE

TOP NEWS

Wall Street closed 2024 with historic gains fueled by AI enthusiasm and Trump's win, though December saw some profit-taking

What a year! The S&P 500 wrapped up 2024 with a stellar 23% gain, riding high on AI fever and rate cut optimism. The tech-heavy Nasdaq outshone with a 29% surge, while Bitcoin stole the show by finally cracking $100k. Though December brought some year-end jitters and profit-taking, the market's two-year gain of 53% marks its best run since the late '90s tech boom.

AI and energy stocks dominated 2024's biggest winners, with Palantir leading an impressive roster of triple-digit gainers

What a lineup of market champions we saw in 2024! Palantir took the crown with a mind-boggling 341% surge, riding the AI wave straight to the bank. Close behind, energy player Vistra lit up with a 258% gain, while AI chip king Nvidia flexed its muscles with a 171% jump. The top 10 list showcases a fascinating mix of tech, energy, and aerospace players, all delivering triple-digit returns in a year that redefined outperformance.

Russia-Ukraine gas transit halt signals potential LNG price surge amid tightening global supply

Europe's gas landscape just hit another turning point with Russian flows through Ukraine going dark after 50+ years. With European storage dipping below average and the need to replace 5% of supply, we're looking at intensified competition for LNG between Europe and Asian buyers. The market's already feeling the heat - European gas prices jumped 50% in 2024, and experts warn we're in for a tight supply squeeze through 2026.

CRYPTO

2024 saw groundbreaking advances in crypto tech, from Ethereum's Duncun upgrade to Solana's comeback and quantum computing challenges

Crypto tech made some serious waves in 2024, with Ethereum's Duncun upgrade stealing the spotlight by slashing data fees and boosting scalability. Solana came roaring back, hitting $9B in TVL and catching Wall Street's eye. Meanwhile, Google's quantum computing breakthrough had crypto security experts updating their playbooks. Layer-2 solutions exploded, with Arbitrum leading the charge past 1B transactions, while DeFi heavyweights like Aave and MakerDAO reimagined their futures.

Web3's evolution requires stronger community governance to combat centralization and scams, with DAOs emerging as a potential solution

Despite Web3's promise of decentralization, we've seen $5.6B lost to crypto scams in 2023. But there's a silver lining: community-driven tokens backed by DAOs are emerging as a potential fix. Take Uniswap's DAO, managing a massive $6B treasury through collective decision-making. As we head into Trump's term, this shift toward digital democracy could reshape how we think about money and governance.

2024: The Year of Memecoins, From Politics to AI

Memecoins dominated 2024, akin to ICOs in 2017 and NFTs in 2021. Platforms like Solana-based Pump.fun fueled explosive growth, with Solana hosting 87% of new tokens by October. Political and AI-driven tokens added intrigue, while Dogecoin soared 405%, bolstered by Elon Musk’s endorsements. Experts predict Base could challenge Solana for memecoin dominance in 2025.

China Intensifies Crypto Clampdown with New Foreign Exchange Rules

China’s State Administration of Foreign Exchange has mandated banks to track and report suspicious foreign exchange activities tied to crypto, gambling, and underground networks. These tighter controls aim to curb unauthorized crypto transactions, reinforcing the government's firm stance. While owning crypto remains legal for personal use, China remains cautious about broader adoption, citing financial stability risks.

GOLD

Gold's Record Rally Isn’t Done Yet

Gold’s 27% surge in 2024 was driven by Fed rate cuts, robust central bank buying, and geopolitical tensions. With the Fed easing further, demand from central banks like Poland and India, and rising ETF inflows, gold’s momentum looks set to extend into 2025. Prices are forecasted to average $2,760/oz, bolstered by safe-haven demand despite potential headwinds from Trump’s inflationary policies and a stronger USD.

DAILY ECONOMIC CALENDAR (ET)

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