5 Things We are Watching in 2025

From possible geopolitical cliffhangers and economic headwinds to technological breakthroughs, the year promises to be anything but ordinary. Trump 2.0's early success could accelerate the quantum behavior in global interconnectedness. Commentators and even newsrooms, in their deterministic living, might struggle with the goings-on.

We have reflected on the global and Indian predictions that didn’t quite materialize in 2024, in our previous blog post.Here are five broader topics and their trajectories we are watching in 2025.

How Governments Respond to the Flight of Capital to the US

Global investors are taking their money to invest in America, thanks to an already strong US economy and stock market performance and expectations of even more vigorous growth and returns under the incoming Trump 2.0 administration, which promises tax cuts, deregulation, tariffs on other exporting economies, and a bid to bring back manufacturing to US shores.

How will the policy and private sector respond to this in the other major economies, especially China and India? China faces tariffs and a broader trade and technology war with the US.

Both Asian economies are also facing inflation/deflation issues and low consumption spending, and they also have to adjust to monetary policy decision-making in the US.

The World Embraces Crypto

The incoming Trump administration is entirely of crypto-converts and crypto-fanatics, with the President-elect himself being the former. If cryptocurrency is promoted by the White House and the Capitol (a bill to make it law for the US to up its Bitcoin holdings to a million in the next four years is pending in Congress), the rest of the world will have to run to adopt it as well.

It could set political and economic changes in the order of the Nixon administration's 1973 dumping of the Gold Standard in motion. Nixon's move came when the developing world sought a New International Economic Order.

Trump's crypto-embrace would come at a time when other major economies and many targets of US sanctions are seeking alternatives to the US dollar in the international trading system.

AI Agents, the Next Wow, Perhaps

If 2024 was an incremental year for Artificial Intelligence, what will drive it in the new year? Marc Andreessen said in 2011, "Software is eating the world." In 2025, we might say, "AI is eating software." When AI Agents are ready, that's precisely what they will do. Killer apps absorb your daily digital regime and directly manage all aspects of your living. Will enterprise software, SAAS, and discrete smartphone apps survive?

We will watch how this shift occurs in the personal and enterprise spaces, who the leaders will be, and how quickly these are adopted. The AI economy is projected to spend $10T on capex. It needs a breakout year to keep the investor faith, but we will watch how it will impact the global tech ecosystem, including the Magnificent Seven.

Survival of India's New-Found 'Equity Cult'

India's stock markets were one of the best-performing in the world recently. Domestic institutional investors—sustained by unrelenting inflows into mutual funds—and a new class of retail investors have powered the long-running rally.

It eased many into believing that domestic investors would step in and insulate India from shifts in global capital flows. India's new love for stock markets has already created giant asset managers like SBI MF, managing assets north of $100B.

After the local bourses cooled off in recent weeks amid waning consumption demand and underwhelming corporate earnings card, the tenacity of domestic investors, many who haven't seen a meltdown, will be on trial.

War over Taiwan, China's Coming Ukraine Moment

Xi Jinping has spoken/telegraphed his intention to integrate Taiwan into the PRC, peacefully or otherwise, most recently in a 'warning' to the incoming Trump administration sought to be conveyed through President Joe Biden. China has crystallized the warning with four red lines that the US must not cross.

Those red lines include the fact that the US must not insert itself into the Taiwan issue and should not seek to restrict China's access to cutting-edge semiconductors to contain China's rise to global power. But will Xi choose to integrate Taiwan in 2025 and use force? No one can say for sure.

That's all the reason to keep an eye on this question. A Chinese move on Taiwan – to invade or blockade the island – would be a world order-changing event, one way or the other, not to speak of the global economic catastrophe it could set in motion. Call it Gray Swan or Gray Rhino, but watch out for it.