Three Themes You Should Know For Trading Markets in 2025

With the turn of the year happening only a few weeks ago, investors and traders alike have been left with one common question: where should my focus be in the new year?

In this piece, we discuss three key themes impacting trading conditions in 2025 and how best to approach them.

It would be remiss not to mention President Trump’s return to the White House as one of, if not the most, significant themes to global markets in 2025.

Following a hard-fought election campaign, the new year has already seen the inauguration of Donald Trump as the 47th President of the United States on the usual date of January 20th, with Donald Trump referring to his second term as the so-called “golden age of America.¹”

In a phenomenon not seen for over 130 years, President Trump is only the second president to successfully regain office after having left, offering the first opportunity in modern history to speculate on future market performance while simultaneously being able to draw parallels to previous market conditions under a Trump presidency.

As for the current day, markets continue to form an impression of what another four years might look like under a Trump government.

While sentiment remains ever-changing, here are a few points on how markets are positioning on some key assets:

1. King dollar
   
   In a single word, Trump’s relationship with the dollar is complicated.
   The incumbent president has made his intentions for the greenback clear, wanting a cheaper dollar so that America can better compete in the export markets and help reduce the current trade deficit - which has increased by some margin in recent years.
   
   The markets, however, seem to have different motivations, with the dollar strength index trading at 26-month highs only seventeen days ago.
   
   Historically, the dollar was cheaper and more stable during Trump’s first stint in the White House compared to current market conditions. Still, only time will tell how new measures will ultimately affect dollar pricing, especially when considering the existing relationship between President Trump and the Federal Reserve leaves much to be desired.
   
2. Crypto: America to be made “crypto capital of the planet” under Trump
   
   Despite formerly being somewhat of a skeptic, Trump has made no secret of his support for crypto in his 2024 campaign.
   
   Speaking at the 2024 Bitcoin conference, Trump vowed to make America the “crypto capital of the planet,” having previously made assurances regarding creating a “strategic reserve” of Bitcoin, similar to emergency reserves of commodities like oil and metals.
   
   As for the markets, Trump’s defiant support for crypto has been undeniably positive—since the election date of November 5th, Bitcoin has increased in value by more than 50%, with much of the crypto market following suit.
   
   With renewed hopes of lax regulation, only time will tell how long optimism will continue, but at least for now, it would seem that much of the crypto market’s fate remains at the mercy of one man and his administration.
   
3. Drill baby, drill
   
   Albeit not the most original of slogans, Trump’s intentions for the future of American energy could not be any clearer. Citing energy prices as one of the primary reasons US inflation recently soared to highs not seen since the 1980s, Trump wants to make the US more “energy independent” during his second term and bring down gas prices for the average American.
   
   Compared to his predecessor, Trump is discernably less concerned with matters of climate change—but how “drill baby, drill” will translate into policy is yet to be fully understood.
   
   With the value of crude oil a key indicator to many aspects of the world economy, time can only tell what difference policy introduced by Trump will make to oil markets, as well as the value of linked currencies like the Canadian dollar.

It’s no surprise that global interest rates look set to take center stage once again in 2025, having previously been one of the most dominant themes to financial markets in the previous year.

Undeniably, 2024 was a year of significant change.

Many major central banks decided to cut rates for the first time in over four years, ending a period of quantitative tightening, assuming inflation to be relatively under control.

This change of the status quo, for better or worse, helped stoke the fires of market volatility as traders came to terms with the new trajectory for interest rates - especially when comparing major currencies like-for-like.

Read more: The Global Trend of Central Banks Cutting Interest Rates

Although, in typical market fashion, things don’t stay the same for too long.

Until late last year, markets anticipated that rates would remain higher for some time in a bid to combat inflation, better adhering to the ‘higher for longer’ narrative.

However, with some murmurings of economic slowdown, compounded by some questionable-at-best trends in key areas like consumer spending and global manufacturing, major central banks like the Federal Reserve could be encouraged to cut rates prematurely to stimulate economic activity.

For all major central banks, the next few rate decisions remain as crucial as ever, not only setting the tone for the year to come, but also to give the impression of whether the priority will be a continued fight against excess inflation, or that of economic growth.

While the dollar remains the ‘world currency’ of choice, and to complicate matters even further, the unknown impact of potential trade tariffs on inflation, along with Trump’s rocky relationship with the Federal Reserve, will likely only feed into the current chaos further.

While markets continue to manage predictions on likely next moves by each central bank, one thing is for certain - the significance of interest rates to the markets this trading year cannot be ignored.

As ever, the notion of ‘safe-haven’ currencies is one to watch in 2025 amidst a developing world of political, social, and economic change.

With the new year already witnessing a polarizing return to the White House, the market’s appetite toward risk will continue to determine, at least in part, the flows in and out of certain currencies.

In a nutshell, this dynamic can be explained as follows:

• In times of economic uncertainty and low-risk appetite, we can expect the interest in ‘safe-haven’ currencies to increase. Examples include USD, JPY, CHF, and XAU
• In times of economic optimism and high-risk appetite, we can expect the interest in ‘risk-on’ currencies to increase. Examples include AUD, EUR, GBP, and NZD

That said, and compared to times in the past, the notion of ‘safe-haven’ flows is arguably more important than ever in 2025.

Offering three examples, here are a few reasons why:

1. Change in American leadership
   
   With some radical changes proposed by President Trump, it would seem that the next four years will be a period of change for the United States, for better or worse. Now, with a level of political uncertainty not seen during Biden’s tenure, markets will need to position wisely on risk appetite.
   
2. Heightened geopolitical risk
   
   Existing global conflicts will weigh more on market appetite in 2025 than in recent memory.
   
   By nature, these happenings can change unpredictably, shifting market appetite towards risk.
   
3. Technological disruption
   
   With artificial intelligence and its advances making the media rounds almost indefinitely, the long-term impact on the world economy has yet to be fully understood.
   
   With questions to be asked about how new technology could improve economic efficiency, 2025 will likely see the expansion of AI to further heights—whether we like it or not.

When trading in the new year, traders should first attempt to grasp the current market attitude and sentiment toward risk-taking and, by extension, the demand for ‘safe-haven’ assets and currencies.

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Footnotes
¹https://www.whitehouse.gov/presidential-actions/2025/01/the-first-100-hours-historic-action-to-kick-off-americas-golden-age/

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