Happy New Year, friends! Recently, I found time to look at the major global investment banks' (2025 Investment Outlook) reports, and I wanted to discuss with you some economic trends in 2025 that are worth our attention in light of the global economic situation in 2024.
The overall environment is entering a global easing policy cycle.
In the second half of 2024, global economic policies will start to shift, and global #通胀 will begin to ease, with most economies starting to cut interest rates. This means that the global economy is gradually transitioning from a 'de-leveraging' phase to a 'leveraging' phase. Such a shift is beneficial for supporting economic growth and risk assets such as stocks and high-yield bonds.
Political changes after Trump's rise to power
#特朗普 The main directions of Policy 2.0 are: 1. Tax cuts 2. Deregulation 3. Trade protection 4. Tightening immigration. The positive impacts of these policies on the U.S. economy include stimulating the economy, boosting demand, and encouraging capital to flow back to the U.S., which would benefit the dollar, the stock market, and Bitcoin. The downside is that it could potentially trigger a rebound in inflation. Additionally, the current expectations of deregulation are driving an increase in risk sentiment. So far, price increases triggered by expectations are beneficial, but this may lead to a market bubble in the future, which investors in the market need to pay close attention to.
The Fed's interest rate cut direction and potential risks
After the easing of inflation, the Fed's focus will shift more towards the labor market. The Fed's first #降息 cut was 50 basis points, but it will be difficult to maintain a rapid decline in the future. As long as the unemployment rate stays below 4.5%, the rate cuts are likely to 'drag on.' Due to a series of policies implemented after Trump took office, along with massive investments in new technologies in the future, inflationary pressures will continue to exist, making it impossible to reach the Fed's target level of 2%. Most viewpoints currently believe that the limit for this round of Fed rate cuts is down to 3.5%, meaning there is still 100 basis points of space left. More investment institutions predict a more pessimistic outlook, such as BlackRock, which believes there is no space for the Fed to lower rates below 4%.
The current economic situation in the United States remains resilient, with high interest rates but still strong domestic demand. The economy has not entered a recession as pessimists in the market predicted after the interest rate hikes. This may be related to the influx of illegal immigrants into the U.S. and the wealth effect brought by the rapid growth of the U.S. stock market. During the Fed's rate-cutting cycle, phenomena like the recent collapse of Silicon Valley Bank are unlikely to occur. The biggest potential crisis for the U.S. now is the risk of national debt.
2025 - New Wave of Investment: Artificial Intelligence
Policies are shifting, and financial markets are being reshaped. Some areas are rapidly developing while others are facing setbacks. The enormous prospects of artificial intelligence are driving a wave of innovation and investment. First, we need to clarify that we are currently in the early construction stage of artificial intelligence, which presents huge opportunities and risks. Many reports indicate that there is a strong business established in the field of digital infrastructure for artificial intelligence among public markets and their private equity partners. Driven by rapid improvements in artificial intelligence models and widespread adoption by enterprises, capital expenditures in artificial intelligence may increase significantly in the coming years. This stage involves substantial investment in data centers, chips, and power systems to meet the demands of artificial intelligence models that are growing exponentially in scale and complexity. Meanwhile, in the private equity market, pure artificial intelligence valuations have skyrocketed. For us investors, only by paying attention and finding investment opportunities in advance can we hope to invest before this new dividend arrives. #Aİ
The state of the Chinese economy and the adjustment direction for 2025
A major current domestic issue is insufficient domestic demand, #房地产 which is in a deep adjustment period. A series of fiscal and monetary policies introduced at the end of 2024 aim to improve this issue. These include but are not limited to issuing ultra-long special treasury bonds to stimulate consumption, lowering existing mortgage rates, and responding to real estate stimulus policies such as the 517 policy, guaranteed housing relending, and stock market stimulus policies. However, the market response shows that the effects are not significant, mainly because the scale of policy stimulus is not large, mostly around 300 billion to 500 billion, which does not fundamentally solve the problem of insufficient domestic demand, and is considered a trial phase. However, it is worth looking forward to China's economic work conference held in December, which set the tone for policies in 2025: stronger fiscal policies, opening the floodgates, and comprehensive stimulus.
