In this week’s newsletter, we first examine the outlook for 2025, given the apparent growing chaos around the world. Then, we move on to potential pitfalls in investing and the global economy, from trade tensions to ever-increasing debt burdens. We then shift our focus to Syria, where the fall of the Assad regime has brought hope and questions about the country’s future. Finally, we end this week by touching the incredible power demand that AI has, highlighting the renewed interest in natural gas as a reliable energy source.

2025 Outlook

The top 10 crises the world can’t ignore in 2025 | International Rescue Committee (IRC)

International Rescue Committee

The three forces that will shape 2025

The Economist

The Eight Headwinds Threatening Global Growth in 2025 

Dambisa Moyo, Project Syndicate

The year 2025 presents a complex and concerning global outlook, defined by a confluence of interconnected crises, powerful headwinds to economic growth, and transformative forces. Humanitarian crises demand immediate attention, particularly in regions ravaged by conflict and climate change. Sudan, enduring a brutal civil war, tops the list as the world’s largest humanitarian crisis with 14.6 million internally displaced people. Somalia is expected to face a worsening hunger crisis in 2025, with 1.6 million children projected to suffer from acute malnutrition. In Haiti, gang violence and government dysfunction have created a humanitarian crisis, leaving almost half of the population struggling with severe hunger and extreme poverty. These crises, alongside ongoing turmoil in Syria, South Sudan, Lebanon, Burkina Faso, Mali, and the occupied Palestinian territory, underscore the urgent need for international cooperation and humanitarian aid.

Beyond these immediate crises, several forces will shape the global landscape in 2025. The return of Donald Trump to the White House, following his projected victory in the 2024 US presidential election, brings with it the potential for significant policy shifts. His protectionist policies, particularly the proposed tariffs on all imports, including a 60% tariff on goods from China, threaten to accelerate deglobalization, disrupt global trade, and further strain the US-China relationship. China’s economic growth, currently around 5%, is projected to fall below 3.5% by 2029 as its population continues to decline. The rapid advancement of artificial intelligence (AI), while potentially boosting productivity and adding trillions to global GDP, could also displace millions of workers and exacerbate existing inequalities. Looming over these developments are eight headwinds threatening global growth: geopolitical fissures, particularly among the US, China, and Russia; divisive domestic politics, fueled by populism and rising inequality; technological disruption from AI; demographic trends, including declining birth rates in developed countries and rapidly growing populations in developing nations; rising inequality, both within and between countries; natural-resource scarcities, driven by factors like population growth and the energy transition; unsustainable levels of government debt; and deglobalization. These interconnected challenges will test the resilience of the global community and demand innovative solutions.

Investing Perils

World Is Facing Dangers From Trade to Debt, OECD Warns 

Craig Stirling, Bloomberg

A turning point for the dollar is coming 

Barry Eichengreen, The Financial Times

Is This Wildly Overvalued Stock Market Doomed? Yes, but Maybe Not Yet 

James Mackintosh, Wall Street Journal

The global economy is teetering on a precipice, grappling with a confluence of interconnected challenges that threaten to derail its recent resilience. The Organization for Economic Cooperation and Development (OECD) warns of a multitude of dangers, including escalating trade tensions, potentially triggered by protectionist policies such as tariffs, which could disrupt supply chains, fuel inflation, and stifle economic growth. Geopolitical conflicts represent another significant risk, with the potential to disrupt trade and energy markets, leading to volatile energy prices. The OECD also highlights the precarious state of public finances, projecting that debt as a percentage of GDP will continue to rise across most G7 nations, reaching a staggering 117% for the OECD as a whole by 2026. This fiscal deterioration could lead to higher borrowing costs, reduced government spending on vital public services, and increased economic instability.

Adding to the complexity, the US dollar is poised for a turbulent ride, influenced by both short-term and long-term forces. In the immediate future, the dollar is expected to strengthen, driven by anticipated protectionist measures from the returning Trump administration, including a 25% tariff on imports from Canada and Mexico and a 10% surcharge on Chinese goods. These tariffs, coupled with proposed tax cuts, could exacerbate demand for US products, necessitating a stronger dollar to rebalance trade flows. However, this short-term strength might be fleeting. The OECD predicts that tariffs will ultimately harm US manufacturing and economic growth, while the Federal Reserve’s aggressive interest rate hikes to combat inflation will further dampen investment. Meanwhile, the stock market is experiencing a period of significant overvaluation, fueled by speculative fervor surrounding artificial intelligence and a perception of American exceptionalism. While these factors might propel markets higher in the short term, history suggests that such expensive valuations are unsustainable and often precede periods of sharp correction, posing a substantial risk to investors.

What’s Next for Syria?

The Middle East’s Dangerous New Normal

Suzanne Maloney, Foreign Affairs

Qatar-Syria-Türkiye gas pipeline project: Is it possible after Assad’s fall?

Türkiye Today

With Assad’s Fall, Erdogan Oversees Turkey’s Growing Regional Clout

Selcan Hacaoglu, Bloomberg

What Happens Next in Syria?

Joanna Sugden, Wall Street Journal

The fall of Bashar al-Assad’s regime in Syria, after 13 years of brutal civil war, has dramatically altered the geopolitical dynamics of the Middle East, creating a complex and precarious “balance of disorder.” The Syrian opposition, spearheaded by Hayat Tahrir al-Sham (HTS), captured Damascus on December 10, 2024, forcing Assad to flee to Russia. Assad’s ouster marks the end of his family’s six-decade rule and opens up a Pandora’s box of possibilities and perils for the region. With Assad gone, long-dormant opportunities, such as the Qatar-Syria-Türkiye gas pipeline project, have resurfaced, potentially reshaping energy flows and regional alliances. This ambitious $10 billion project, first proposed by Qatar in 2009, aims to transport natural gas from Qatar’s South Pars/North Dome field to Europe via Saudi Arabia, Jordan, Syria, and Turkish distribution terminals. Assad’s refusal to sign the agreement in 2009, allegedly to protect Russian interests in the European gas market, is no longer an obstacle. However, the pipeline’s success hinges on the establishment of a secure and stable Syria, a daunting task given the current volatile environment.

Turkey, under the leadership of President Recep Tayyip Erdogan, sees Assad’s downfall as a chance to solidify its regional influence. Turkey aims to establish a buffer zone inside Syria along their shared 900-kilometer border, primarily to counter the Kurdish forces it considers a threat due to their affiliation with the PKK, a separatist group active in Turkey. The US backing of these Kurdish forces creates a potential point of friction between Turkey and the US, adding another layer of complexity to the situation. Erdogan also sees an opportunity to address the issue of Syrian refugees in Turkey, hoping to facilitate their return to a stabilized Syria. The success of these Turkish aspirations is intertwined with the broader question of what comes next in Syria. The ability of HTS, despite its history as a terrorist organization, to establish a functional and inclusive government remains uncertain. The group’s attempts to present a more moderate image are viewed with caution by the international community. Moreover, the fragmented nature of the Syrian opposition, the potential for the resurgence of groups like ISIS, and the looming influence of regional powers like Iran all contribute to a highly unpredictable future for Syria. The fall of Assad, while a pivotal event, has thrown the Middle East into deeper uncertainty, creating a complex interplay of competing interests and aspirations that will shape the region for years to come.

AI’s Power Demand

Unexpected Surge in US Power Demand Draws Comparison to WWII Era 

Josh Saul, Bloomberg

US Electricity Demand Forecast to Surge 16% Over Next Five Years 

Will Wade, Bloomberg

AI Boom Is Driving a Surprise Resurgence of US Gas-Fired Power

 Josh Saul, Naureen S Malik, and Mark Chediak, Bloomberg

The United States is experiencing a dramatic surge in electricity demand, a phenomenon not witnessed since the World War II era. Projections indicate a potential increase of 15% to 16% over the next five years, representing a significant challenge for the power sector. This unprecedented growth, reminiscent of the 1939 to 1944 period when manufacturing output tripled and electricity demand rose by 60%, has caught many experts off guard. Chris Seiple, Vice Chairman of power and renewables at Wood Mackenzie, highlights this unexpected surge, emphasizing the need for swift infrastructure planning to accommodate this rapid growth. The reasons behind this surge are multifaceted, with data centers emerging as a major driver. Rob Gramlich, President of Grid Strategies, points to the insatiable appetite for power by data centers, particularly those involved in artificial intelligence operations. By 2030, electricity usage by data centers is expected to increase tenfold.

The escalating demand has sparked a renewed interest in natural gas as a reliable energy source. While solar and wind power were initially envisioned as primary solutions for future energy needs, the current reality suggests a more prominent role for natural gas in the near term. Jed Dorsheimer, Group Head of the energy and sustainability sector at William Blair, observes this shift, anticipating that natural gas could account for as much as 60% of new power generation. This trend is further underscored by data from the Sierra Club, which reveals that companies announced plans for new gas-fired power capacity at the fastest pace in recent years during the first half of 2024. This resurgence of gas-fired power plants, while potentially complicating efforts to achieve a zero-emission electricity sector by 2035, reflects the immediate need for reliable and scalable energy solutions to meet the burgeoning demand. The situation underscores the complex balancing act between addressing immediate energy requirements and pursuing long-term sustainability goals.