As investors step into the new year, they are closely watching the inauguration of Donald Trump’s second term, an event that could clarify uncertainties surrounding global politics and the economy. Particular attention is being paid to potential interest rate cuts, rising defense spending, and the aging of populations—factors influencing investment strategies. Key themes also include the strength of the U.S. dollar and shifts in the energy sector. Here’s a subjective selection of notable investment trends for 2025.
Modest Market Growth and High Valuations
Since the start of the year, global indices like the S&P 500, Dow Jones, and Nasdaq have risen slightly—up to 1%. Investors are focused on Trump’s January 20 inauguration and his policy plans. Ahead of the ceremony, the U.S. corporate earnings season kicks off on January 15 with JP Morgan and concludes in late February with Nvidia, providing insights into corporate expectations and potential investor reactions. However, high valuations of U.S. companies remain a concern, with S&P 500 forward price-to-earnings ratios exceeding 23—well above historical averages.
Investment Trends to Watch in 2025
1. A Strong Dollar (At Least in Q1 2025)
Trump’s protectionist and pro-inflationary policies have strengthened the dollar, a trend further supported by market conditions. This creates pressure on emerging market currencies, including the Polish złoty, due to trade risks and potential capital outflows. The dollar could surpass parity with the euro in Q1, though this trend might weaken in the latter half of 2025.
2. Interest Rate Cuts and Their Impact
Globally, further interest rate cuts are expected, favoring equities and cryptocurrencies. In Europe, the cuts may be more pronounced, while in the U.S., only one cut is anticipated this year. In Poland, rate reductions are likely delayed until 2026.
3. Artificial Intelligence Driving Innovation
AI continues to be a cornerstone of corporate investment. Additionally, the development of quantum computing could revolutionize computational power, making it a key area to watch.
4. Growing Popularity of Cryptocurrencies and Risky Assets
Anticipated regulatory support in the U.S. and increased capital inflows may further popularize cryptocurrencies and other high-risk assets.
5. Rising Interest in Cyclical Industries
After years of tech dominance, investors are shifting focus to industries like manufacturing, infrastructure, and construction, diversifying portfolios both geographically and sectorally.
6. Decline in Green Energy Popularity
The “drill baby drill” policy and increased U.S. oil production could hinder the growth of renewable energy, particularly if commodity prices fall.
7. Increased Defense Spending
Defense budgets are rising fastest in Europe, led by Poland (5% of GDP). NATO is considering a minimum defense spending target of 3% of GDP for member nations, benefiting defense, construction, and service industries.
8. Aging Populations
In many countries, including Poland, the demand for healthcare services is growing. This trend favors pharmaceutical, biotech, and medical equipment companies, particularly those focused on personalized medicine.
9. Revival in Struggling Economies (e.g., Argentina)
Thanks to reforms and international support, Argentina is gaining investor confidence. Turkey’s declining inflation also points to potential recovery in other economically challenged nations.
10. End of the War in Ukraine – Russia’s Return to Financial Markets
A potential resolution or freezing of the conflict in Ukraine could lead to the lifting of some sanctions and the return of Russian companies to global markets, reopening investment opportunities in these firms.
Author: Paweł Majtkowski, Analyst at eToro Poland
Source: ManagerPlus
