It's natural as each year ends to look over our financial holdings, checking to see how well (or poorly) we did and thinking about what 2025 might bring. Many people turn to experts at such times, assuming they know better than we do about economic conditions and prospects.
The problem, though, is that experts rarely agree. (And even if they did, they could be wrong!)
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Here's a look at a range of expert predictions, along with some thoughts on what you might do to position yourself well for 2025 and beyond.
The experts say...
Here's are some perspectives and predictions from a range of financial experts:
Goldman Sachs research has forecast that the S&P 500 will gain 10% in 2025. (It actually expects a 9% gain in the index, which would be a total return of 10% with dividends included.) It also expects 5% revenue growth for the S&P 500, 2.5% real GDP growth, and inflation ending the year around 2.4%. Its experts expect that tariffs from the incoming administration along with expected tax cuts might "roughly offset one another."
Analysts at Vanguard expect GDP growth to be 2.1% for 2025, with core inflation of 2.5%. They see bonds as offering a good risk-reward proposition lately, and note that "While the median of our U.S. return outlook over the next decade appears cautious, the range of possible outcomes is wide and valuations are rarely a good timing tool."
JPMorgan Chase offers this: "J.P. Morgan Research's baseline scenario for 2025 is one that sees global growth still remaining strong. U.S. exceptionalism is expected to bolster the U.S. dollar and buoy U.S. risky assets, but the outlook appears more mixed for Treasuries [bonds]." J.P. Morgan Research projects the S&P 500 will end 2025 around 6,500.
Strategist Crit Thomas at Touchstone Investments is ready for growth stocks to possibly underperform in 2025, in part because many currently carry steep valuations along with slower earnings growth: "These stocks may need to pause and allow earnings to catch up with valuations." Thomas has also pointed out how top-heavy some stock indexes are, with a handful of mega-cap companies making up much their value. In such cases, a pullback in those companies could bring the index down meaningfully.
A survey of 15 Wall Street firms arrived at a median S&P 500 value 6,600 by the end of 2025, or a gain of around 9% from recent levels. The lowest projection came from UBS, expecting the S&P 500 to end at about 6,400 -- which would still be an increase of more than 5%.
Schwab sees the outlook for the U.S. market as difficult to predict due to extreme uncertainty about what 2025 will bring. They note that the incoming administration's "proposals have always sparked intense debate, but the extreme uncertainties surrounding them -- and the myriad associated crosscurrents -- have made it difficult to forecast their impact on both domestic and global conditions." Still, they see the current economy as very strong and healthy and while they're generally bullish, they note that "We never try to time markets as it's a fool's errand. We do try to provide guidance and a sense of direction."
Making sense of it all
You can see that just among this limited group of examples, there are differences of opinion. There are, interestingly, some similarities. Most of these experts seem to be predicting that the S&P 500 will advance around 9% or 10% in the coming year. That might be right, but there's a perfectly good chance that it will be wrong. (One explanation for the similarity might be the firms not wanting to go out on a limb and be different, lest they end up looking bad.)
Consider, for example, all the wrong predictions from a year ago. One firm expected the S&P 500's worst crash since 2008 and the beginning of a recession. (The S&P 500 was up around 25% year-to-date as of this writing, with no recession.) JPMorgan said: "Equities are now richly valued with volatility near the historical low, while geopolitical and political risks remain elevated. We expect lackluster global earnings growth with downside for equities from current levels," Morgan Stanley expected a generally flat stock market for 2024.
What should you do?
So what should you do? Well, if you're not comfortable having as much money invested in stocks as you do now, then consider moving some of your money out of them. But understand that the stock market is simply inherently volatile. There will always be occasional corrections and crashes -- but the market has gone on to recover from all of them and to set new highs. Still, this is why you only want to invest in stocks with long-term dollars -- ones you won't need for five, if not 10, years.
For long-term investors, it's hard to be the wealth-building potential of the stock market. You don't have to chase market darlings and overpriced growth stocks to build your wealth, though. A simple index fund such as one that tracks the S&P 500 can be all you need if you want to be invested in stocks.
The stock market has delivered double-digit gains for multiple years in a row and it can be doing so now. But in anticipation of an eventual pullback, you might keep some of your portfolio in cash, so that you can pounce on some opportunities that materialize.
Otherwise, don't fret too much about what the market will do in 2025. Instead, focus on the decades ahead. If you're saving and investing for your retirement that will start in 2045, how the market performs in a single year like 2025 shouldn't matter all that much.
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Charles Schwab is an advertising partner of Motley Fool Money. JPMorgan Chase is an advertising partner of Motley Fool Money. Selena Maranjian has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool recommends Charles Schwab and recommends the following options: short December 2024 $67.50 calls on Charles Schwab. The Motley Fool has a disclosure policy.
