Weidong Li's random walk in the investment world

最近几周，美元遭遇了自2008年金融危机以来的开年最大跌幅，其主要原因有以下三点：

关税和贸易战不确定性
特朗普实施的同时针对加拿大，墨西哥，欧盟以及中国等主要贸易伙伴的高额关税政策，导致市场对全球贸易前景产生担忧，从而引发投资者平仓美元多头头寸.

经济数据疲软与降息预期
就业数据不及预期和零售销售走弱等经济指标，使市场预期美联储今年可能会加大降息力度，而降息通常会削弱美元吸引力。

全球资本流向变化
由于对特朗普政府一系列经济政策和财政政策的担忧，投资者纷纷将资金转向欧元、日元等其他货币和市场，资本出逃进一步压低了美元价值。

As we reflect on the trends that defined 2024, it’s becoming increasingly clear that this year may present formidable challenges for investors. While market optimism has often been the rallying cry, several underlying factors signal that caution and preparedness are more important than ever as we walk into 2025, the investment landscape is presenting a mix of headwinds that are hard to ignore, several fundamental factors suggest that investors should brace for a challenging year. In particular, stretched valuations, escalating geopolitical tensions, disruptive trade policies, and an overhyped AI narrative paint a concerning picture of the financial outlook for 2025.

Stretched Market Valuations

One of the most alarming indicators is the current state of market valuations. Using metrics like the Shiller-PE ratio, it’s clear that the equity market is operating near historical highs. These elevated valuation levels imply that much of the anticipated growth is already baked into asset prices. Should there be any unexpected economic slowdown or earnings disappointments, the risk of a sharp market correction becomes ever more likely. This precarious pricing environment leaves little margin for error and suggests that the current market exuberance might be unsustainable.

Heightened Geopolitical Tensions

The global political landscape remains a significant source of uncertainty. Heightened geopolitical tensions are contributing to market volatility and investor unease. From regional conflicts to international power struggles, these uncertainties have the potential to disrupt economic activity and undermine confidence in global markets. For investors, such an unpredictable environment necessitates a more defensive approach, as the ripple effects of political instability can swiftly translate into losses in market valuations.

Disruptive Trade Policies and Supply Chain Risks

Adding to the uncertainty are the extremly protective trade policies of the Trump administration. While designed to shield American domestic industries, these policies risk triggering significant disruptions in global trade and supply chains. Such disruptions can lead to increased costs and supply shortages, creating a breeding ground for sustained inflation. For companies dependent on smooth, international trade flows, the resulting operational inefficiencies may hurt profit margins and, by extension, the broader market outlook.

The Fragile Promise of AI-Driven Productivity

In recent years, the promise of AI-powered productivity gains has fueled considerable investor enthusiasm. However, the reality is proving to be less transformative than anticipated. The investment thesis surrounding AI appears fragile, with many companies still struggling to deliver consistent, tangible benefits from their technological investments. The overhyped narrative around AI risks misallocating capital into ventures that may not yield the anticipated returns, leaving investors exposed to the consequences of inflated expectations.

Conclusion: Sitting tight when the tide is turning….

In summary, 2025 is shaping up to be a year where caution should be the watchword for investors. With equity markets priced near historical highs, escalating geopolitical tensions, trade policies that could disrupt global supply chains, and a questionable AI productivity narrative, the environment is fraught with risks. Investors would be well-advised to reassess their portfolios, emphasize diversification, and adopt a defensive posture in anticipation of potential market corrections.

While every challenging market cycle also presents opportunities, the current landscape underscores the importance of vigilance and a measured approach. In a year where the risks seem to outweigh the rewards, protecting capital and preparing for volatility is more crucial than ever.

                       -What year 2025 holds for equity investors…

For global equity investors, few years have been better than 2024. Fueled by enthusiasm around artificial intelligence and the triumph over inflation control, stock markets in the developed world posted one of their greatest payoffs in history. The S&P 500 has risen more than 25% in 12 months, and the tech-heavy NASDAQ delivered a whopping 27% in 2024, with awe-inspiring companies such as Nvidia and Tesla leading the charge. After the U.S. election in early November, the equity market received yet another injection of optimism from Trump’s victory, anticipating a business-friendly, deregulated investment environment down the road. By the end of the year, the euphoria had also spilled over to other non-traditional asset classes such as cryptocurrencies. Looking at the broader economy—where the unemployment rate is low, productivity is high, energy costs are dropping, and property prices are recovering—one can only conclude that Santa is indeed coming to town this Christmas, and with only two more weeks to go, it is tempting to expecting 2025 in the same roze view.