American investors are preparing for a series of changes in 2025. In a month, Trump will officially return to the White House 'throne' as the 47th president of the USA.

These changes include tariffs, deregulation, and tax policies, which will impact the market after President Trump is re-elected and returns to the White House, focusing on whether the USA economy can continue its excellent performance.

Looking back at Trump's first term,$S&P 500 Index (.SPX.US)$the overall trend was upward, closely linked to the implementation of his policies. The tax cuts and deregulation policies initially provided momentum for the market, while fluctuations in trade policy brought uncertainty in the mid-term. The COVID-19 pandemic, although causing a short-term shock to the market, was mitigated by timely policy responses that helped the market recover.

Overall, as an important indicator of the performance of the USA stock market, the S&P 500 Index experienced significant changes during Trump's term.

With the power transition in Washington, there will be a significant impact on the performance of stocks, bonds, and currency in the new year, which may require investors to adjust their portfolios.

Some predictions indicate that the stock market will continue to be strong in the coming year, the dollar will maintain its recent strength in the next few months, and US Treasury yields will continue to rise.

The following are the main market themes and sectors that investors are closely watching.

The 'American Exceptionalism'

Investors generally expect the USA economy's strong performance to continue into the new year, with robust consumer spending and a resilient labor market making USA economic growth more solid than that of many Developed Markets peers.

Potential tax reforms, including lowering corporate tax rates, are expected to further support the USA economy. Such tax cuts will require Congressional approval and may support corporate earnings and stock market sentiment.

In contrast, despite the Eurozone economy growing faster than expected in the third quarter, its outlook remains weak due to the potential large-scale tariffs that the Trump administration might implement.

Global Macro Strategist Sonu Varghese from the Carson Group stated, "We expect that with the potential support of favorable monetary and fiscal policies, the USA's economic growth will exceed that of the rest of the world by 2025."

Federal Reserve

In 2025, investors are focused on the pace and magnitude of the Federal Reserve's interest rate hikes or cuts. At the December meeting, the Federal Reserve continued to cut rates after a period of aggressive hikes but indicated it would slow the pace of further cuts.

Expectations of loose monetary policy supported the US stock market. However, after the December Federal Reserve meeting, the benchmark US Treasury yield rose significantly, and the outlook for interest rates could undermine the stock market's gains.

The Dollar Reigns

Those betting against the dollar have suffered this year, and most Forex market strategists now predict the dollar will continue to strengthen.

Many factors driving the dollar's 7% increase against a basket of currencies this year, including relatively strong economic growth in the USA and rising US Treasury yields, are expected to continue supporting the dollar.

Trump's tariffs and trade protectionist policies may also support the dollar.

The outlook for escalating inflation may impede the Federal Reserve's ability to keep pace with its peers in decreasing interest rates, and even if other central banks continue to lower rates, it would further boost the dollar.

Given the dollar's central role in global finance, accurately grasping its trends is crucial for investors.

A strong dollar could pressure the outlook of American multinational companies and complicate other central banks' efforts to combat inflation, as it would depreciate their currencies.

Payment Company$Corpay (CPAY.US)$Chief Market Analyst Karl Schamotta stated, "Another remarkable surge of the dollar could disrupt certain aspects of the Global economy, but given the significant uncertainty surrounding the future and the fact that another round of the USA exceptionalism surge has essentially been priced in, further exceptional performance may be hard to achieve."

Volatility

Investors experienced how quickly market stability can turn into turmoil last Wednesday. After the Federal Reserve's forecast cut the predicted number of rate decreases in half compared to September and concerns about a possible partial government shutdown intensified, the U.S. stock market fell sharply.

Global financial markets may carry the overall calm trading condition into the new year, but analysts warn that a volatility shock is overdue.

Analysts from Bank of America's Global Research department stated that they do not expect a repeat of the record low stock market volatility levels seen in 2017 (the beginning of Trump's first term).

Due to the influence of tariffs and central banks, the Forex market may face higher volatility next year.

Senior Portfolio Manager Fredrik Repton from Neuberger Berman's Global Fixed Income and Currency Management team stated, "The shock absorbers for the financial market next year will be the Forex market."

Crypto craze

Analysts indicate that in 2024, a wave will sweep through.$Bitcoin (BTC.CC)$The speculation frenzy related to Cryptos and Stocks is unlikely to fade in the new year. "2024 is a year of speculation, which has evolved into a self-fulfilling frenzy in recent weeks."

Although these trades sometimes encounter trouble, the most recent being after the Federal Reserve's December meeting, investors have consistently been willing to Buy on dips. Sosnick said, "When something has been used by many for a long time, they are reluctant to let it go."

And these trades have indeed been effective. After it was anticipated that Trump's election would create a friendly regulatory environment for Cryptos, Bitcoin set a historical high of over 0.1 million dollars in December.

Stocks related to Cryptos have also been on the rise, with Software companies and Bitcoin hoarders.$MicroStrategy (MSTR.US)$Leading the charge, with an increase of over 400% this year.

Some content is from Jin10 data.
Editor/Rocky