We have come from a world with a single superpower in America to a live contest between the US and China over territory, influence and technology. Set against this background, here are some trends to watch in 2025, categorized by the probabilities that I have assigned them.
High probability (above 70%): President-elect Donald Trump has appointed businessmen Elon Musk and Vivek Ramaswamy to the extra-governmental Department of Government Efficiency (DOGE).
Yet, the “partnership” between Trump and Musk is likely to be strained to breaking point this year. The circumstances surrounding that break-up will make for great drama.
China is in deep economic trouble and its incrementalism is not helping. Its 10-year government bond yield is now at a historic low of 1.6%. China is now also in deflationary territory.
For President Xi Jinping to go back to his modus operandi of consolidating power, he will need the economy to be a neutral factor. Look for a massive stimulus programme to revive the Chinese economy.
For the prior two years combined, the S&P 500 outperformed Vanguard’s All-World ex-US index ETF by 56% to 23%. A meaningful Chinese stimulus combined with a market tendency to revert to the mean would reverse this trend, putting a dent in American economic exceptionalism.
Unlike in 2024, there are only a few elections to be held in India this year. The just-announced February election for Delhi favours the incumbent Aam Aadmi Party, which seems to have a better ground game.
In the absence of credible opposition, the Bihar election to be held in summer is likely to see a return of the Bharatiya Janata Party’s coalition partner Nitish Kumar and his party to power. The global anti-incumbency wave is unlikely to have an effect in India.
The frenetic pace of progress in artificial intelligence (AI) will further accelerate this year. While ChatGPT has widespread name recognition, Meta’s open-source Llama model is likely to become the dominant AI model for businesses.
Nvidia’s physical AI stack will extend current Generative AI capabilities with the understanding of spatial relationships and physical behaviour of the 3D world. With this shift, the word of 2025 could well be ‘agentic AI.’
The first regulatory salvo against the destructive effects of social media on teens has been fired in Australia. Look for restrictions and bans to expand to more countries, while the US bucks this trend and becomes more ‘rule-less’.
Medium probability (above 50%): Years 2023 and 2024 turned out to be bittersweet for Indian cricket. The men’s team lost the 2023 Cricket World Cup to Australia against the run of play, but edged South Africa in the T20 World Cup finals in 2024.
The year ended poorly with an away-series Test loss against Australia. 2025 will be a transition year, with the Champions Trophy one-day-match tournament coming up. India, in my view, will make one of the four semi-final slots.
Stable coins may become a more mainstream component of wallets in the US in 2025. With a friendly regulatory environment, the technological advantages of a fully backed, ledger-based blockchain currency are likely to become more visible and acceptable.
India will probably continue to drag its feet on legitimizing any form of private cryptocurrency, preferring to support the Central Bank Digital Currency (CBDC) instead. Its uptake will be slow.
Technological progress in quantum computing, synthetic biology and nuclear fusion will continue, but practical applications at scale are several years away.
Uncertain probability: There are ongoing wars in Ukraine, Gaza and Sudan. With Trump in power, the Ukrainian conflict may move towards a settlement, but it seems unlikely that the process will be completed soon.
With Iran’s proxies in West Asia largely neutralized, the Gaza conflict looks likely to conclude in 2025, but no one seems to know what comes next. One possibility is for an Arab-led coalition to monitor the physical territory of Gaza for an indeterminate period.
This coalition will need to bear a substantial bill for rebuilding Gaza. The civil war in famine-stricken Sudan continues unabated, with tens of thousands dead and millions displaced. The non-existent global response does not augur well for an end to this conflict in 2025.
There will be much hot air about climate change strategies, but little real action. In this field, look for China to make further progress and the US to muddle along. Europe will posture and preach, but will have little to show.
With the US turning inwards, China in an economic funk, Russia preoccupied with Ukraine and Iran in a quagmire, it seems unlikely that these powers will aid or abet wars in other locations in 2025.
That leaves Türkiye and Saudi Arabia (with its ally UAE) as the only aspiring regional powers capable of intensifying any local conflicts into larger ones. The UAE’s growing friendship with China is causing a major headache for the US. In some technological areas, look for the UAE to be fenced-in with China.
All in all, expect 2025 to be a year in which artificial intelligence trumps common sense.
P.S.: “You’ve got to be very careful if you don’t know where you are going, because you might not get there,” said Yogi Berra.
#brace #grabbag #trends
