Febby

In 2024, most equity benchmarks saw an increase in value, signaling a year of growth following previous periods of stagnation. The S&P 500 rose by approximately 24%, the Dow Jones by 13.2%, and the German DAX by 18.83%. Even the Chinese Shenzhen Composite Index grew by 3.91% after a rollercoaster ride throughout the year. The biggest winner by far was the technology sector, which saw growth of over 26%. Overall, 2024 represented an improvement in financial markets. Many expect the same trend to continue in 2025.

2024 in a nutshell

In 2024, the American people voted for Donald Trump to return to office in a historical comeback. The head of the Federal Reserve said that the time has come for policy to adjust, ushering in the beginning of rate cuts. AI development made Nvidia worth 3.4 trillion dollars. China implemented a series of economic stimulus measures to counteract challenges and accelerate growth. Malaysia and Singapore launched a special economic zone in Johor. Iran faced a major blow in both Lebanon and Syria. And it was the last year during which Russian gas flowed to Europe through pipelines in Ukraine.

When it comes to the green transition scene, critical minerals demand surged due to their essential role in clean energy technologies, with significant increases in lithium, nickel, and cobalt. However, supply chain challenges arose, including long development times for new mines and geopolitical tensions affecting global mineral availability. Governments responded with policies to secure supplies, such as the U.S. Department of Energy’s focus on reducing vulnerabilities and Australia’s green regulations. Technological advancements in renewable energy were notable, with solar power generation and electric vehicle sales booming, particularly in China. International forums like the Critical Minerals and National Security Conference and the OECD Green Growth Forum highlighted the intersection of minerals, national security, and sustainable development. Energy security was a key concern for several countries, and critical minerals were the obvious vehicle to drive economies towards that goal.

A degree of volatility can be expected in 2025 with Trump coming back to office. He has already caused some ruckus with Denmark with his remarks about Greenland and a national economic emergency plan. Despite this, there are still positive trends taking place that will likely withstand the pressures. Here are a few.

The technology sector in 2025 is poised for growth, driven by advancements in AI, the thriving semiconductor industry, and strategic M&A activity. Companies like Nvidia and Snowflake are capitalizing on AI’s potential, while high valuations for giants like Microsoft and Alphabet reflect sustained investor confidence. The semiconductor sector, essential for AI infrastructure, continues to expand, and China’s strategic focus on innovation intensifies global competition. Despite high expectations, the monetization of AI technologies remains a key investor focus. Overall, firms demonstrating robust growth, AI integration, and strategic positioning are set to thrive in an optimistic yet discerning market environment.

Additionally, the humanoid robotics sector, projected to reach $38 billion by the 2030s, is rapidly advancing with contributions from companies like Tesla and startups such as Figure AI, focusing on industrial applications. Nvidia’s CEO highlights “physical AI” in robotics as a multitrillion-dollar opportunity. While high costs and regulatory challenges remain, the industry’s progress signals a growing role for humanoid robots in manufacturing and beyond, supported by significant investments and technological breakthroughs. A promising player in this space is Realbotix, a company specializing in customizable humanoid robots with advanced AI. With its strong financial position, strategic initiatives, and focus on companionship and AI integration, Realbotix (TSXV: XBOT | OTCQB: XBOTF | FSE: 76M0.F) is well-positioned to capitalize on the expanding robotics market, making it an attractive investment as the sector continues to evolve. Another startup worthy of consideration is NextGen Digital (CSE: NXT | FSE: Z12), which is a good option for investors who want to gain exposure to micro-technology digital platforms.

President-elect Donald Trump’s upcoming tariffs in 2025, including a 25% tariff on imports from Mexico and Canada, and a 60% tariff on Chinese goods, are expected to impact various sectors. Domestic manufacturing, particularly in steel and aluminum, could benefit from reduced foreign competition, while automakers sourcing domestically may gain an edge. However, sectors reliant on international trade, such as automotive suppliers, electronics, and consumer goods, face higher production costs that could lead to higher prices. Additionally, agriculture may suffer from retaliatory tariffs. Overall, while some domestic industries may see short-term gains, the broader economic impact could create challenges for import-dependent sectors.

With the cessation of Russian gas supplies via Ukraine in 2025, Europe has implemented a range of strategies to mitigate the impact, including diversifying energy sources through increased LNG imports, expanding energy storage, and promoting conservation. The crisis has triggered significant economic challenges, particularly in energy-intensive industries and consumer prices. Geopolitically, Eastern Europe, particularly Slovakia, has raised concerns over transit disruptions, while Moldova faces energy instability due to a lack of Russian gas. In the long term, Europe is accelerating its shift towards renewable energy, enhancing energy efficiency, and forging new energy partnerships to ensure energy security and independence. These efforts aim to create a more resilient and sustainable energy system for the future.

The cessation of Russian gas supplies is expected to create a mixed impact across various industries. Renewable energy companies like Sono Group (OTCQB: SEVCF), Ørsted, Iberdrola, and Vestas are poised to benefit from Europe’s push for green energy, while LNG suppliers like Cheniere Energy and Shell will gain from increased demand for alternative gas sources. Energy storage firms like Fluence Energy and infrastructure operators such as Trans Adriatic Pipeline will see growth as Europe diversifies energy sources. However, companies heavily reliant on Russian energy, such as Gazprom and Eni, as well as energy-intensive industries like BASF and ArcelorMittal, will face higher operational costs. European automakers and agricultural firms, which depend on stable energy prices, could also be adversely affected by the price hikes. Overall, the energy shift will benefit those in renewables and LNG, while traditional energy and high-consumption sectors will face challenges.

The growing demand for critical minerals in 2025, driven by the transition to clean energy, the expansion of electric vehicles (EVs), and technological advancements, presents significant opportunities for exploration companies in the U.S. and Europe. Government initiatives, such as the U.S. Inflation Reduction Act and the EU Green Deal, are backing domestic mining projects, which incentivize local exploration efforts. This demand surge, especially for minerals like lithium, cobalt, and nickel, is creating lucrative opportunities for companies involved in mineral exploration, as they stand to benefit from increasing investments and partnerships in mining projects. Additionally, the geopolitical shift towards reducing dependence on Chinese minerals further elevates the strategic importance of domestic mineral exploration in these regions.

However, while U.S. and European exploration companies are well-positioned to capitalize on this growing demand, they must overcome challenges such as environmental regulations, long development timelines, and public opposition to mining. The shift towards more sustainable and independent supply chains requires significant investment and innovation in mining technologies, such as remote sensing and automation, to discover new deposits. Despite these hurdles, the exploration of critical minerals remains a key component of both regions’ energy security and clean energy transitions, making them critical players in the global effort to secure the materials needed for renewable energy and advanced technology industries.

Investors who want to add mineral exploration stocks to their portfolios can consider high-potential companies like Amex Exploration (TSX-V: AMX | FRA: MX0 | OTCQX: AMXEF), Alta Copper (TSX: ATCU | OTCQX: ATCUF | BVL: ATCU), Arctic Minerals (STO: ARCT), Canadian North Resources (TSXV: CNRI | OTCQX: CNRSF | FSX: EO0), QuestCorp Mining (CSE: QQQ), Demesne Resources (CSE: DEME | OTCQB: DEMRF | FSE: RK9), First Nordic Metals (TSXV: FNM | OTC: FNMCF), Lithium Chile (TSXV: LITH | OTCQB: LTMCF), and Sonoro Gold (TSXV: SGO | OTCQB: SMOFF | FRA: 23SP).  Those companies are at different developmental stages and offer different exposure to different minerals, allowing investors to diversify their portfolio and maintain minimal risk.

China’s economy in 2025 is projected to experience modest growth, with a GDP increase of around 4.5%, reflecting persistent deflationary pressures and challenges in key sectors. Despite government stimulus measures, such as relaxed monetary policies and trade-in subsidies, consumer prices have risen slowly, and bond yields have reached historic lows, signaling concerns over stagnation. Consumer confidence is expected to decline, especially among lower-tier consumers, while youth unemployment remains a critical issue, with many young people withdrawing from the workforce. Although luxury market demand is stable among high-tier consumers, the broader economy faces significant structural challenges, and the effectiveness of stimulus measures will be crucial in shaping the country’s economic trajectory moving forward.

2025 is expected to be a continuation of the recovery we have witnessed in 2024. Despite some volatility triggered by President-elect Donald Trump’s tariff plans, which are expected to impact sectors like manufacturing, agriculture, and electronics, there are positive trends in several industries. Technology companies, particularly in AI, semiconductors, and robotics, are poised for continued growth, with companies like Nvidia and Realbotix capitalizing on AI advancements and robotics applications. Meanwhile, the demand for critical minerals, driven by the green energy transition and EV expansion, presents significant opportunities for U.S. and European exploration companies, though regulatory hurdles and long development timelines remain challenges.

Europe’s energy landscape will also undergo significant changes as it adjusts to losing Russian gas supplies, with a focus on increasing LNG imports, renewable energy, and energy efficiency. This shift benefits companies in the renewable energy and LNG sectors while posing challenges for industries reliant on Russian energy. Meanwhile, China’s economy is expected to grow modestly, facing deflationary pressures, stagnant consumer confidence, and rising youth unemployment. The country’s efforts to stimulate growth will be key in navigating these challenges, but the economic outlook remains cautiously optimistic. Overall, 2025 is expected to bring a mix of growth, adjustments, and challenges across sectors and regions.

The yen has long been regarded as a safe haven, but in August, it became the culprit behind significant turmoil in the financial markets. Early in the month, global equities and most G7 currencies plunged, while the yen surged, marking what can be described as the unwinding of the carry trade. Following the U.S. Federal Reserve’s July 31st meeting, initial optimism over potential interest rate cuts quickly soured as investors began to view the move as a sign of underlying economic weakness rather than a stimulus.¹ This shift in sentiment was aggravated by a series of disappointing economic data points, including manufacturing and jobs reports, raising concerns about the overall health of the U.S. economy. As highlighted by AMP’s chief economist Shane Oliver, this shift has reemerged with significant force, particularly in the U.S. markets. As a result, many investors were forced to close their positions, which had largely been financed by selling the yen and buying the dollar, effectively reversing much of the yen’s previous weakness.

Amidst all the chaos and excitement, the question remains on everyone’s mind: has the carry trade fully unwound? Let’s explore this.

The yen carry trade, where investors borrow yen due to the low Japanese interest rates to invest in higher-yielding assets, has long been a popular strategy. However, like most strategies, it has recently undergone a severe stress test. 

Evidence of Unfinding

According to experts from JPMorgan Chase & Co., the unwinding of the yen carry trade is far from over.² Arindam Sandilya, co-head of global FX strategy at JPMorgan, noted that the carry trade unwind within the speculative investing community is only “somewhere between 50%-60% complete.”

This rush has had significant ripple effects across both emerging and developed markets, with currencies like the Mexican peso being particularly hard-hit. The peso, which had been a major beneficiary of carry trade flows, has seen a decline of 6.8% over the past month—the most among major world currencies tracked by Bloomberg. Analysts believe that the technical damage inflicted on portfolios by the sharp move in the yen is not easily undone, suggesting that a full recovery of carry trades to previous levels is unlikely in the near term.

Adding to this perspective, Richard Kelly, head of global strategy at TD Securities, expressed caution, stating that it is still “too early” to declare the end of the carry trade unwind.³ Kelly emphasizes that the yen remains significantly undervalued, suggesting that the unwinding process may continue as the Bank of Japan potentially tightens its monetary policy further. This could lead to additional spillover effects, particularly as interest rate hikes shift in unfavorable directions for carry trades.

Recession Fears Adding Fuel to Fire

The current landscape for carry trades is further complicated by ongoing fears of a U.S. recession, which are now seen as a primary driver of the yen’s recent surge rather than the Japanese rate hikes. According to Taro Kimura, a senior Japan economist, the pace of the yen carry trade unwinding is reminiscent of the rapid reversal seen in 2007 during the onset of the subprime mortgage crisis. The future of the carry trade will likely hinge on the evolution of the U.S. economy and the Federal Reserve’s policy responses.

However, opinions are divided. Some analysts believe that most of the immediate disruption from the yen-funded carry trade unwind has already occurred. These analysts suggest that while the yen is likely to maintain its recent gains, the bulk of the turbulence might be behind us, with carry trades stabilizing in the near future.

Given these developments, it is clear that while significant progress has been made in unwinding yen carry trades, the process is not yet complete. Investors should remain cautious as further adjustments in global markets could continue to unfold.

As the yen carry trade continues to unwind, several factors will shape its future trajectory. Speculation around central bank interventions, such as a potential emergency rate cut by the Federal Reserve, raises questions about further yen strength, which could exacerbate the unwinding process rather than halt it.⁴ Similarly, while Japanese officials might attempt to curb the yen’s rise, past efforts suggest such measures would only slow its appreciation.

The stock market’s performance, particularly in the tech sector, could influence carry trades, but ongoing volatility suggests that pressure may persist. Analysts warn that the selling pressure in the yen carry trade is far from over and that volatility is expected to remain high, especially in emerging markets. Despite some signs of stabilization, opinions vary on whether the worst is behind us. While some believe that the immediate disruption may have passed, others caution that the yen could strengthen further into 2025, keeping investors on edge.

In this uncertain environment, staying vigilant and informed about central bank actions and market developments will be crucial as the carry trade story continues to evolve.

^{1 The Guardian. Share market chaos explained: what’s behind the stock meltdown and will there be a recession?
2 Yahoo! Finance. JPMorgan Says Carry Trade Unraveling Is Only Half Complete
3 CNBC. The big ‘carry trade’ unwind is far from over, strategists warn
4 Charles Schwab. Carry Trade Unwind: Is It Really Over?}

Thus far in 2024, major stock market indices have shown varied performances, reflecting diverse economic conditions globally with western indices performing generally better than emerging market ones. In the U.S., the Dow Jones rose to new highs, while the NASDAQ, and the S&P 500 maintained an upward trajectory, indicating a mix of optimism and sector-specific challenges. European indices like the FTSE 100 and DAX displayed minor movements, suggesting cautious investor sentiment. 

For Emerging Markets (EMs), the scenario is complex with geopolitical tensions and economic resilience influencing performance. The iShares MSCI Emerging Markets ETF (EEM) highlighted long-term underperformance against U.S. markets, but a weakening U.S. dollar and lower valuations offer potential opportunities for long-term investors. Overall, 2024 presents a landscape of cautious optimism in developed markets and a nuanced outlook in EMs, with geopolitical risks still on the rise.

The US continues to play a pivotal role in driving global economic dynamics. According to recent updates from the International Monetary Fund (IMF), the US economy is projected to experience a substantial growth rate of 2.1% in 2024, buoyed by government fiscal measures and robust consumer expenditure. On the other hand, the forecast for the Eurozone has been adjusted downwards to a mere 0.9% growth rate for the same year. China, however, has seen a positive adjustment in its economic growth expectations, now anticipated to see a 4.6% expansion in 2024. Japan, in contrast, is grappling with the dual issues of escalating consumer prices and tepid economic expansion, compounded by stagnant real wages that struggle to match the pace of inflation. Despite these challenges, the NIKKEI index recently reached an all-time high, marking a significant milestone after 34 years since its last peak in 1989.

The outlook for critical minerals and precious metals in 2024 and beyond remains positive given several factors. Demand for critical minerals like lithium, cobalt, nickel, and copper is expected to rise sharply due to their essential role in renewable energy technologies and electric vehicles, highlighting a pressing need for increased exploration, development, and recycling efforts to meet this demand and mitigate supply constraints and geopolitical risks​​. 

Precious metals, particularly silver and platinum, are poised for appreciation, driven by easing monetary policies, industrial demand, and their indispensable use in green technologies and fuel cells. Gold, while expected to see moderate price increases, faces a shift in demand dynamics, with investment demand softening and official demand stabilizing at higher levels​​.

The economic slowdown in some regions poses challenges but also sets the stage for a modest recovery that could influence metal prices and demand. The overarching trend towards sustainability and electrification underpins the long-term outlook for these resources, with the mining sector at a critical juncture to balance economic performance with environmental and social governance considerations​​​​. As the industry navigates through these complexities, strategic investments and innovations in mining and metal extraction technologies are essential to ensure a sustainable supply chain that can support the global transition to a cleaner, more sustainable future.

As 2024 progresses, it appears to hold more promise than 2023, particularly with the ongoing US elections and the uncertain future of the Biden Administration’s efforts for re-election. In this context, Global One Media provides essential support for companies looking to expand their reach globally. Our team, comprised of experienced marketers and digital strategists, focuses on connecting your brand with a diverse audience worldwide. We specialize in developing and implementing targeted digital marketing strategies that aim to communicate your message effectively. Engaging with Global One Media means accessing a wealth of knowledge in digital marketing and investor relations to support your project’s growth. Contact us to learn how we can assist in achieving your goals with a more measured approach.