The year 2025 is shaping up to be a dynamic period, marked by significant transformations in the economic, social, and financial spheres. Many of these trends are directly or indirectly impacting our lives, while others have relevant financial implications, even for those who do not invest in financial markets.
At BBVA Switzerland, we have selected the 25 most relevant trends that will mark this decisive year:
1. Concentration risk: The levels of concentration of large companies in stock market indices are the highest in history thanks to their excellent stock market performance. The year 2025 will be crucial to determining whether these companies are able to maintain their high market shares and market capitalizations.
2. Reactivation of mergers and acquisitions. The market's sentiment regarding mergers and strategic acquisitions has improved substantially, with the expectation of a significant recovery in activity for 2025. The Republican presidential victory adds an additional catalyst, as changes are likely to facilitate approval of resolutions and improve tax conditions.
3. Artificial Intelligence. The adoption of AI will continue to gain ground as companies incorporate this technology into their production processes.
4. Cryptocurrencies and tokenisation. Trump's victory has led cryptocurrencies to new all-time highs. The sentiment around blockchain technology and cryptoassets continues to break all established paradigms.
5. Defence expenses. Analysts believe we are still in the early stages of a structural increase in defense spending by major countries. Specifically, the new US administration may require their Western partners to make greater efforts in this regard.
6. Nuclear energy. Decarbonization and energy security have one point in common: nuclear energy. Although the debate between the benefits and costs, such as for waste storage and safety, continues, nuclear energy will likely remain a controversial topic for analysts and investors throughout 2025.
7. Quantum computing. Progress in quantum computing promises to revolutionize business and government innovation, although it can also pose threats to institutions, which must protect themselves against the pernicious use of this technology.
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8. Fixed-income: Start of a bull market? Since 2019 (over five years), fixed-income markets have been providing negative cumulative returns to investors, something that has never happened in history. However, historically, in previous cycles of rate cuts by the Fed, these assets have provided very high cumulative returns.
9. The year in which the inflation target of 2% will be reached. Since COVID-19 (March 2020), the average annual inflation rate has grown to around 4%. The restrictive policy applied by central banks since March 2022, which is beginning to take effect, should "weigh" on inflation and bring it down to around 2% in 2025.
10. ECB's power to cut rates below 1.5%. Despite solid global growth in the years following the pandemic, the weakness of some European economies, such as Germany, with economic growth close to 0%, could lead the European Central Bank (ECB) to cut rates, potentially bringing them to levels below 1.5%.
11. Deflation could end in China in 2025. Unlike the world's major economies, annual inflation growth in China in recent years has been close to 0% or even negative. Interest rate cuts, reserve requirement ratio reductions, along with fiscal stimuli and stabilization of the real estate sector, could help China emerge from its deflationary spiral in 2025.
12. Milei's policies will continue to provide a new boost for Argentine sovereign debt. In 2024, unlike almost every other fixed-income market, Argentina's sovereign debt provided very positive returns. The policies implemented by Milei's administration, which have led to a significant reduction in inflation, along with the first budget surpluses, could continue to serve as a catalyst for Argentine fixed-income assets.
13. Gold. The price of gold has exceeded all estimates, breaking historical highs and reaching capitalization levels never before seen. In 2025, with inflation under better control, it could behave differently.
14. Oil. Against all expectations, the price of a barrel of oil has surprised all analysts in 2024 with its weakness. The strength it showed during the early stages of the Ukraine war now seems distant, and we wonder how it will evolve in 2025, in a more stable economic environment and with lower inflationary pressures.
15. Yen. The yen was the center of attention in the early months of 2024 due to its extreme strength against the USD, after years of continuous depreciation. In 2025, we will have the opportunity to see if this movement could signal a trend reversal, or simply be a "pause along the way."
16. Turkish lira. The Turkish lira continues its particular depreciatory trend against stronger currencies, such as the USD and the euro. High inflation in Turkey and the country's economic instability have negatively impacted its currency. In this regard, the current year is expected to continue this trend.
17. Sustainability. In 2025, the focus on sustainability begun by governments and companies years ago should continue, leading to a greater social awareness of the issue. As time progresses, we are starting to see the scope of the policies implemented.
18. Geopolitics. The idea of increased geopolitical risk, with significant global implications, was established years ago. Unfortunately, this situation is far from over and is increasingly present in our lives and investment decisions.
19. USA vs. the rest of the world. As every year, the debate arises between the valuation of the US stock market versus the rest of the world and its outlook for the new year. All analysts and investors are aware of the significant valuation differential, but they are also mindful of the higher quality of American companies and their stronger earnings growth.
20. Protectionism and trade. The arrival of Donald Trump to the presidency of the United States has added a high degree of uncertainty and lack of clarity regarding certain factors, such as the potential trade tariffs he announced during his electoral campaign. All indications suggest that these will be more moderate and gradual than initially expected.
21. European elections (Germany). General elections will be held in Germany in the first quarter of 2025 due to the collapse of the current coalition government. These elections are of particular interest because of the instability in the Eurozone, combined with significant structural imbalances and the rise of less traditional political parties.
22. Cybersecurity challenges. One of the most significant challenges faced by large corporations and public organizations is cyberattacks and the rise in cybercrime. This issue is critical, since criminals increasingly have access to more advanced and powerful systems, which companies must counter with multimillion-dollar investments.
23. Workday. A few weeks ago, we received the news that the Japanese government intends to implement a reduction in the work week from 5 to 4 days, which underscores the effects of increased productivity on employees' lives.
24. Aging population. One of the factors that has the greatest influence on our lifestyle and long-term economic outlook is the aging of the population and its effects. Irreversible trends, with significant consequences on certain industries and sectors, such as pharmaceuticals and pension funds.
25. Biometric technologies. A technology that has already become part of our daily lives and has made it significantly easier to interact with software applications. There is still a long way to go, and we seem to be advancing at a truly incredible pace. We are not ruling out new and unexpected advances during 2025.
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