Executive Summary
Trump 02 will remain a key risk that global markets need to be wary of in 2025, considering the policies implemented during the incoming U.S. President’s previous tenure. Trade spats and imposition of trade tariffs will increase economic uncertainty, deglobalize trade and therefore will be inflationary. Fed’s response to these developments will need to be assessed and could result in heightened volatility. The trio of current global geopolitical landscape, role of U.S. as a swing producer for oil, and Trump’s unpredictable and transactional style could trigger volatility in energy prices. Markets need to be prepared to handle bouts of volatility in 2025. Dollar continues to be strong and Trump02 may keep that going. While the reserve currency status of USD cannot be questioned, the trade angle can mean some currencies may fall (read USD strength) causing currency volatility. Beyond the political situation with Trump being elected as the US president, the second most important risk with many sub risks is the elevated valuations of S&P 500. Given the high concentration of M-7 stocks and an elevated valuation risk for M-7 stocks, it will be prudent to fish in the 493-stock pond than M-7 to realize some value.
