Navigating Market Volatility and Seizing Investment Opportunities in 2025

Hello, students and friends!  

I’m delighted to meet you all at Diamond Ridge Financial Academy as we embark on this journey to learn the latest investment strategies together.  

Let’s unlock the potential of quantitative trading and begin a straightforward, rewarding investment experience!

With the New Year holiday approaching, the market, which should have been calm, saw a sharp sell-off. Almost all major investment assets dropped significantly. While many students are on vacation, many of you have reached out to ask how to respond to such sharp fluctuations. Some are worried about whether the market will continue to fall, while others are questioning the investment outlook for next year.

To help everyone clarify the current situation and come up with reasonable investment strategies, I’d like to start by analyzing the deep reasons behind this adjustment and also look ahead at potential directions for action. Before we dive into the discussion, let’s take a look at the performance of the UK stock market today.

Today, the UK stock market opened relatively smoothly. The FTSE 100 index opened lower but quickly recovered, showing some signs of rebound. However, as the US stock market opened, market sentiment quickly turned pessimistic and the FTSE 100 index dropped sharply. Toward the end of the day, the market stabilized somewhat, but it still closed down by more than 0.3%, ending around 8121 points.  

Looking at sectors, technology stocks and financial stocks saw the biggest declines, both dropping over 1%. This adjustment is closely linked to the synchronous drop in US tech stocks. While the energy sector showed some resistance, its gains were limited and couldn’t provide effective support to the overall market. On the other hand, cyclical industries like real estate and construction were relatively strong, but their small gains couldn’t reverse the overall downtrend.

Compared to the drop in the UK stock market, the fluctuations in the US stock market today were more pronounced. Several factors are working together behind the sharp adjustment in the US stock market. First, the rise in bond market yields is a key reason for the pressure on stocks.

The 10 year US Treasury yield rose again to 4.59%, marking a 100 basis point increase since the Fed started cutting rates in Sep. The rise in bond yields sends mixed signals: on one hand, it reflects expectations of higher inflation in the future; on the other hand, it reveals investors' doubts about the effectiveness of the Fed's rate cuts and increased caution about the future economic outlook. High bond yields push up corporate financing costs, while reducing the relative attractiveness of stocks, putting significant pressure on the stock market.

In addition, geopolitical events have also impacted market sentiment. The latest news reports that Russia has rejected the solution to the Russia-Ukraine war proposed by Trump and the new US president's team suggested postponing Ukraine’s NATO membership, further increasing market anxiety. However, investors need to note that although these geopolitical dynamics may trigger market volatility in the short term, their long-term impact has mostly been absorbed by the market. For example, the tension in the Middle East, despite the lack of clear signs of a ceasefire, has limited space for further escalation. Therefore, these factors are more "noise" in the short-term market fluctuations and investors shouldn’t panic too much about them.  

More importantly, the core driving force behind this market downturn may not come from a significant deterioration in fundamentals, but rather from technical sell-offs in the specific environment at the end of the year. At the end of the year, many investors choose to take profits or optimize their taxes, a common phenomenon in recent years. Meanwhile, lower trading volumes during the holiday season also amplified market volatility. As the "market barometer" of the world, the technical adjustments in the US stock market have a particularly noticeable impact on the sentiment of other markets.

However, from a longer-term perspective, the panic sell-offs in the short term may actually provide investors with a good opportunity to position in quality assets. The core driving force of the US stock market is still technological innovation, a trend that has led the market in recent years and will continue to play an important role in the future.  

Whether it’s the widespread use of generative AI, the accelerated promotion of autonomous driving technology or the rise of clean energy, the US market stands at the forefront of global technological change. These technologies not only bring exponential growth opportunities in their own fields but also change the competitive landscape of traditional industries through spillover effects. For example, manufacturing has significantly improved production efficiency through intelligent transformation and the financial industry has optimized risk management and asset allocation with big data analysis and AI algorithms. The rapid penetration of these technologies into sectors like healthcare, retail and even entertainment is also reshaping industry structures in an irreversible way.

For example, Trump Media & Technology Group (DJT), as a social media platform, is built on the combination of big data and AI. This technology driven approach not only gives the platform enormous user growth potential but also brings sustainability to its business model. During today’s trading, when DJT stock price dropped to $33.5, I decisively recommended increasing positions, especially for students who missed the entry at previous lows. This drop became an important buying window.  

Similar cases include stocks like Rolls-Royce. While these stocks have brought considerable profits after initial positions, recent tightening monetary policies and geopolitical tensions have led to adjustments in stock prices. Some students have felt anxious and even expressed dissatisfaction with the short-term losses. However, short-term market fluctuations are more emotional reactions than real reflections of a company’s fundamentals. For high-quality assets like Rolls-Royce, short-term adjustments provide investors with an opportunity to buy on dips or optimize their positions.

Although the US's technological leadership also makes its monetary policy changes have a significant impact on global capital markets. For example, the Fed’s recent statement about reducing the number and size of interest rate cuts next year directly raised market expectations of tighter monetary policy, which in turn suppressed the performance of global risk assets. However, this does not mean that the market outlook is bleak. On the contrary, long-term investors should seize this adjustment opportunity, allocate assets wisely and embrace future growth opportunities.  

You need to understand that technological innovation is still the core driving force behind long-term growth in the capital markets. Areas like AI, big data, autonomous driving and clean energy are developing rapidly and are expected to continue to provide solid support for the market in the coming years. Especially in AI, breakthroughs in every aspect, from chip manufacturing to algorithm applications, are driving the whole industry to new heights.

Facing the current market uncertainty, many students are experiencing emotional fluctuations, especially becoming more anxious during the recent downturn. The underlying reason for this phenomenon is a lack of a portfolio investment mindset and unclear recognition of risk.  

The core reasons why most investors in the market incur losses can be summarized in two points: First, blindly chasing the market up during an upward trend, buying high with the mindset of "miss it and it’s gone forever"; second, panic selling during a downturn, or even blindly chasing the market down, causing losses to expand. These behaviors are entirely driven by emotions, lacking a systematic approach and plan, ultimately missing out on profit opportunities.  

To avoid this, we must learn to build a portfolio investment mindset. Portfolio investment is not only an effective way to reduce risk, but also a scientific method to achieve steady growth through the reasonable allocation of assets.

Portfolio investment helps balance and diversify investment strategies. In terms of practical planning, on one hand, focus on technology driven core sectors, especially those companies and related digital assets with long-term competitive advantage and innovation potential; on the other hand, maintain a moderate defensive allocation by choosing blue-chip stocks with stable dividends and reasonable valuations or by choosing mainstream crypto like BTC and Eth that have long-term appreciation potential to diversify investment risks.  

At the same time, we need to closely monitor the Fed's policy trends and global macroeconomic changes and make reasonable portfolio investments based on the interconnections and differences between the various asset classes, so we can adjust asset allocation more flexibly.

For example, last Friday, we discovered that the overall return in the US stock market was significantly higher than in the UK stock market. This difference is not only reflected in the driving force of technological innovation but also closely linked to the industrial structure and policy environment. Therefore, when building a portfolio, we should not limit ourselves to a single market but adopt a more global perspective, choosing regions and industries with higher return potential.  

After the holiday, starting on Jan 2nd, we will provide a detailed explanation of this topic. The course will focus on high growth potential industries in the US stock market, diving deep into specific sectors and individual stocks to help you clearly understand technology driven investment opportunities. At the same time, we will also analyze the performance of some more defensive industries, providing diversified options for those with lower risk tolerance.

In addition, we will also expand our analysis to other asset classes, such as the correlation between the forex market and the stock market, as well as the differences and connections between crypto and tech stocks. In recent years, both tech stocks and crypto have been heavily driven by innovative technologies, but there are clear differences between the two in terms of volatility, risk structure and return characteristics. These differences present potential arbitrage opportunities and how to seize these opportunities will be an important part of our post-holiday course.

More importantly, one of the key courses after the holiday will be delivered by our chief analyst, who will explain "Asset Arbitrage Theory." The core of this theory is to observe the price fluctuation relationships between different asset classes and identify certain profit opportunities. Whether in the global stock market or the crypto market, the correlations and diversifications between assets are constantly evolving. Mastering this theory will help you find stable profit paths in a volatile market in a more scientific way.

Whether dealing with short-term risks or future opportunities, please trust that our Diamond Ridge Asset Management professional analyst team will always be by your side. In the upcoming year of 2025, we can clearly feel that it will be a year full of both opportunities and challenges. As a key turning point for the acceleration of AI and blockchain technology integration, next year will not only be a year of AI's rise but also the first year of asset tokenization. Breakthroughs in AI technology will continue to drive innovation in financial markets. Whether in traditional stock market investment strategies or in the innovation applications of the crypto market, AI's deep involvement will make both more efficient and precise.

At the same time, asset tokenization is changing our understanding and application of investment tools. Traditional asset classes such as national bonds, real estate and even private equity funds are reshaping liquidity and accessibility through digital tokens, providing us with more opportunities to participate. In 2025, we will enter a more digital and diversified new era of investment.

In this entirely new market landscape, we need not only to establish clearer investment philosophies but also to actively embrace technological changes. For example, the upgraded version of quantitative trading, launched with the help of AI breakthroughs, will play an unprecedented role in improving investment efficiency, optimizing asset allocation and dynamic risk management. We believe these tools will help you achieve higher and more stable returns in the new year.

Tomorrow is the last day of this year and we are about to welcome the new year of 2025. I would like to extend my sincerest wishes to all the students who have supported and trusted us. Over the past year, whether in the market’s fluctuations or the rapid development of technology, it has all been part of our shared experience and growth. No matter the results, these experiences have made us more mature and determined.

I hope that in the new year, not only will you find more success in your investments, but also more happiness and fulfillment in your life. May 2025 be a year where we continue to move forward together, making progress in both knowledge and investments. Wishing you all a Happy New Year in advance and successful investments!