Editor’s note: Below is an op-ed by John Bartleman, President&CEO of TradeStation Group, Inc. provided exclusively to Investing.com. The views of Mr. Bartleman may not be the views of Investing.com.
2025 will likely be a year of transformation and uncertainty. It could also be a year of opportunity for investors to review and adjust their portfolios as technology continues to disrupt business. Tapping into the multiple waves of innovation and identifying potentially profitable trades 1 against a backdrop of an unpredictable geopolitical environment, may challenge investors.
Trump 2.0 has seemed to fuel optimism among investors that the incoming administration’s pro-growth credentials could potentially be a ‘slam dunk’ for stock prices. Are they right? Investors will need to understand the mega forces driving global markets - and the reality is much more nuanced and one of several factors that could shape markets in 2025.
Industry speakers at the recent conference organized by TradeStation Group, the Crossroads Summit, suggested investors can expect to be confronted by two themes in 2025 - chaos and innovation. These themes could add volatility to markets at a time when the 60/40 portfolio mix of stocks to bonds, a very traditional allocation mix, continues to underwhelm and may no longer serve modern investors.
Chaos in this context refers to the increasingly unpredictable world we live in, including the instability of geopolitics, the uncertainty of economic policies that were once taken at face value, and the unknown impact of innovation itself.
Innovation is the speed-of-light metamorphosis from leading edge scientific research to the things we consume. It goes beyond artificial intelligence (AI) to quantum computing, biotech, robotics, and nanotechnology. These technologies are increasingly impacting markets, companies, and trading opportunities.
There’s No Trumping Trump
The elephant in the room is how markets will continue to view a second Trump administration and there are a lot of boxes to tick. With Republican control of both the Senate and House of Representatives, some investors are betting big on the trifecta’s economic impact. Close to $140 billion has poured into US equity, bond, and money market funds during the week ending November 6, according to data provider EPFR. And the S&P 500 jumped more than 2% to record highs the day after the election.
Together with Trump’s seemingly market friendly cabinet picks, some investors are translating that to mean sweeping reforms that will benefit corporate America. The likelihood Trump will weaponize tariffs may stoke inflation and put the administration on a collision course with the Federal Reserve. In fact, inflation is already once again on the ascendancy, according to ITR Economics.
In a stark warning to investors, veteran investor Paul Tudor Jones noted in a recent interview, “All roads lead to inflation.”
Trump’s proposed tax cuts could add $800 billion to the federal deficit and overheat an already strong US economy, the Peterson Institute of International Economics says. That may prompt several questions for investors. Should they trade near-term liquidity for longer-term value? Should investors inflation-proof their entire portfolio? These questions will be on their minds.
Meanwhile, cryptocurrencies and digital assets appear to potentially benefit under Trump as investors contemplate a tamer SEC.
Innovation Amidst the Chaos
AI is now embedded in almost everything and is transforming our world in a market that is growing faster than the internet in the 1990s. The numbers are jolting. By 2030, AI is forecast to add $15.7 trillion to the global economy, and North America could be a major beneficiary boosting GDP by 14.5%, per consulting firm PwC. Early-stage investors have seen strong performance but there is already talk of a bubble in what may be a pivotal year.
Looking ahead, investors may explore emerging sectors where AI could redefine existing business models. Examples include education and health. Mental health is the latest niche market to get investors’ attention with recent findings by Grand View Research estimating a compound annual growth rate (CAGR) of 24.1% by 2030.
Yet, innovation is more than AI - important as it is. In December, Google (NASDAQ:GOOGL) unveiled ‘Willow,’ its latest quantum chip. Google says Willow performed a benchmark computation in under five minutes that would take one of today’s fastest supercomputers 10 septillion or 10 25 years, a number they say vastly exceeds the age of the Universe.
How long before Willow or derivations become commercially relevant is hard to say but major advances in quantum computing will likely have a knock-on effect in pharmaceutical and biotech research. The evolution of quantum computing will drive ancillary businesses including those that can meet the huge energy demands of quantum computing and data centers for processing vast amounts of information.
Another exciting area is robotics, which holds the promise of uncovering new applications, including the agriculture and defense sectors, while deepening its use case in healthcare and manufacturing. Recent estimates suggest the global advanced robotics market is set to become a sector with more than $260 billion in revenues by 2033, according to Dimension Market Research. Simply put, we are at the dawn of a modern-day industrial revolution.
Remember the Big Picture
Everything is connected literally and figuratively but the adage that markets dislike uncertainty still holds true.
Unexpected geopolitical events and predicting their outcomes remain a major challenge. Conflicts in Russia, Ukraine, and the Middle East may rumble on, and new potential conflicts such as China invading Taiwan may be part of the new normal.
The world’s demographics are also changing. “An aging population in South Korea together with a declining birth rate and low fertility levels may impact market dynamics, consumerism and consumption,” according to author and geopolitical expert, Peter Zeihan. It is a similar situation in Singapore, China, and Germany, leading Elon Musk to suggest that Singapore in particular may become extinct.
While it is evident that geopolitical conflicts, economic shifts, and demographic changes introduce new complexities, investors who stay attuned to emerging technologies and innovations may be well-positioned to uncover profitable investment opportunities.
1 Past performance, whether actual or indicated by historical tests of strategies, is no guarantee of future performance or success. There is a possibility that you may sustain a loss equal to or greater than your entire investment regardless of which asset class you trade (equities, options, or futures); therefore, you should not invest or risk money that you cannot afford to lose.