Bitcoin, stocks and gold: What investment in main asset classes will look like in 2025

The robo-crypto bull statue on the campus of the Miami Dade College Wolfson campus in Miami, Florida. AFP

There is no question about the clear investment winner in 2024 – the booming US market and its cryptocurrency outriders like Bitcoin.

Gold also shone, while cash and bonds held up nicely, as interest rates stayed high giving investors attractive yields for little or no risk. The rest of the world couldn't keep up with Wall Street, Europe and emerging markets lagged, and the UK’s promising start faded.

However, investing is cyclical and it’s unlikely these trends will roll on unchecked in 2025. The excitement of the US presidential election and subsequent "Trump bump" have given way to caution as inflation proves sticky. So what lies ahead?

Stock markets

The US S&P 500 soared 25 per cent with tech stocks once again leading the charge, as AI chip maker Nvidia surged another 175 per cent.

Global stock markets have posted solid gains of 17 per cent, but the US grabbed the spotlight. However, as president-elect Donald Trump prepares to take office, investors are wary of high US stock valuations and potential trade wars.

Yufeng Qiu, senior trader at APM Capital, remains optimistic about the US, especially the tech and energy sectors. “Mr Trump’s proposed tax cuts, deregulation and fossil fuel incentives could fuel growth in these areas.”

She warns his import tariffs could hit industries reliant on cross-border trade. “Companies with strong domestic foundations and pricing power will be better positioned,” Ms Qiu adds.

Wall Street strategists are cautiously optimistic about 2025, says Mohamed Hashad, chief market strategist at Noor Capital. “They forecast the S&P 500 will climb around 10 per cent, with a range from 5 per cent to 15 per cent.”

The risk is that inflation lingers and delays Fed rate cuts. “High stock valuations may limit the upside potential. Earnings growth will be crucial,” Mr Hashad says.

Tony Hallside, chief executive of the Dubai brokers STP Partners, suggests exploring smaller companies, given recent large-cap outperformance. “European and Chinese equities could gain ground in 2025. Europe may benefit from renewed focus on industrial and defence sectors, while China remains attractively valued.”

The Chinese economy is growing at nearly twice the rate of the US, and recent stimulus may boost this, Mr Hallside adds.

Outlook: US shares may be more volatile in 2025 and cheaper markets could play catch-up, but Wall Street is still the market to beat.

Gold

Gold has been a star performer since the turn of the millennium, rising from $288 an ounce in 1999 to an all-time high of $2,790 in October 2024. It retreated towards $2,630 as the year closed but this still marked an impressive growth of almost 30 per cent across 2024.

Ole Hansen, head of commodities strategy at Saxo Bank, sees the dip as a buying opportunity. “It means traders and investors no longer have to pay a record price to gain exposure.”

However, gold could lose its lustre for a while. "Gains of this magnitude can attract profit-taking and position squaring.” Gold remains what Mr Hansen calls a “dead asset”, as it pays no interest or dividend, but has storage costs.

Yet he expects the price to rise as central banks diversify away from the US dollar, while lower interest rates reduce the opportunity cost of holding gold. “Safe-haven demand is rising amid unresolved conflicts in the Middle East and Russia-Ukraine, while trade wars and tariffs may lift inflation.”

Chinese investors are turning to gold amid record-low savings rates and property market concerns, Mr Hansen adds.

Outlook: In a worried world, gold’s safe-haven appeal should see it shine again in 2025.

Bitcoin

Bitcoin had a stellar year, more than doubling from $44,000 to top $100,000 for the first time.

Vijay Valecha, chief investment officer at Century Financial, credits its rally to a pro-crypto agenda under Mr Trump, including key appointments like Elon Musk and Howard Lutnick. “The launch of spot Bitcoin ETFs in January also played a major role, with total assets exceeding $100 billion,” he says.

The simplicity of Bitcoin ETFs has attracted institutional funds, creating a feedback loop of rising prices. Improved infrastructure and user-friendly platforms have also made Bitcoin more accessible. “There’s still room for further growth,” Mr Valecha concludes.

Outlook: Bitcoin’s volatility makes it a risky but exciting bet. As ever, approach with extreme caution.

Cash

The Fed cut interest rates just three times in 2024, far fewer times than expected, which helped preserve the appeal of cash, Ms Qiu says. “While inflationary pressures may linger, cash offers a solid defensive option. However, its purchasing power could erode unless inflation falls."

Diversifying across currencies may mitigate risks, adds Mr Hashad.

Outlook: Cash isn’t king any more, but it remains a key defensive asset and liquidity source.

Bonds

Reuters declared 2024 the “year of the bond” as investors pumped a record $600 billion into global fixed income, chasing high yields ahead of 2025’s uncertainties.

Ms Qiu expects short-term US Treasuries and investment-grade corporate bonds to attract conservative investors next year, too. “Long-term government bonds could come under pressure if inflation expectations rise.”

Emerging market bonds tied to commodities may offer higher risk-adjusted returns as global demand for metals and minerals recovers.

Mr Hashad favours bonds as prices should rise once interest rates start falling. “High-quality corporate bonds and government securities offer a safe haven amid economic uncertainties. Emerging market bonds provide higher yields albeit with increased risk.”

Outlook: Bonds are regaining their status as an essential portfolio diversifier after recovering from a disastrous 2022.

Currencies

The US dollar posted another strong year, rising 6 per cent against the euro and Swiss franc, and more than 10 per cent against the yen. Experts say the greenback may weaken if the Fed accelerates rate cuts in 2025.

S&P Global Ratings global chief economist Paul Gruenwald, says the opposite could happen: “The new US administration looks set to juice up the economy, raising the spectre of higher inflation pressure, higher US rates and a stronger dollar.”

Mr Valecha predicts the euro and dollar could hit parity, signalling risk aversion and further flows into US assets. China and other emerging markets aim to reduce dollar dominance, but progress is likely to be slow.

Laith Khalaf, head of investment analysis at AJ Bell, says the US retains the luxury of having the world’s reserve currency, which helps underpin demand for its dollar-denominated bonds. “Strangely Mr Trump seems quite keen to undermine the dollar by promoting Bitcoin as an alternative store of value.”

Outlook: The dollar may slip slightly in 2025, but should remain dominant.

Commodities

2024 was tough for commodities, with demand squeezed by China’s slowing economy. However, Ms Qiu is optimistic for 2025. “Governments ramping up green energy investments will drive demand for industrial metals like copper, lithium, and nickel,” she says. Agricultural commodities could be volatile amid climate-related disruptions and supply chain issues.

Oil prices hovered around $70 a barrel in 2024. Ibrahim Masood, senior vice president at Mashreq Capital, predicts slight declines in 2025. “Opec will likely curtail output further, but rising US oil production could offset this,” he says.

Outlook: Commodities, especially industrial metals, show promise as green energy projects accelerate. Oil may idle but a geopolitical shock could quickly change that.