2025 a "Year of Two Halves" for Markets

Market Overview - The year 2025 is characterized as a year of two halves, with significant volatility in the first half due to uncertainties around tariffs, followed by a market rebound as the impact of tariffs on earnings was less severe than anticipated [2][3] - As 2026 approaches, there is renewed uncertainty, this time related to economic factors and monetary policy, suggesting a potential repeat of the initial conditions seen in 2025 [3] Technology and AI Sector - There is an ongoing debate about whether the current AI market is in a bubble, with the consensus being that while a bubble exists, the situation is more complex than the dot-com era of 1999 [4][5] - Notably, there has been no margin expansion in AI-related companies this year, contrasting with the significant margin growth seen during the dot-com boom, making direct comparisons less valid [6][7] - The focus is shifting towards the monetization of AI, with infrastructure providers like data centers and chip makers expected to benefit, regardless of the monetization success of hyperscalers [7] Cryptocurrency Market - A recent 32% selloff in the cryptocurrency market is viewed as a typical occurrence, with historical patterns indicating that such sell-offs often represent entry points for investors [9][10] - Institutional adoption of cryptocurrencies is increasing, with major financial institutions like Bank of America and JP Morgan facilitating access to crypto ETFs, indicating a positive long-term trend for cryptocurrency adoption [11][12] - The favorable regulatory environment for cryptocurrencies is also seen as a long-term tailwind, reinforcing the notion that sell-offs are a normal feature of the asset class rather than a cause for concern [12][13] 2026 Economic Outlook - The initial outlook for 2026 suggests a defensive start, similar to 2025, but there is an expectation of transitioning to a more risk-on environment as the economy stabilizes and a new Federal Reserve chair is appointed [14][15]