2025 Stock Market Predictions

Speaker 1 (00:00):

For some it's tax season. For some it is fitness and weight loss season, and for others it's stock market prediction season. And this is the time of year when all of the financial experts and gurus are coming out and they're telling us where the s and p 500 is going to be at the end of this year. Now, a simple search into the historical track record of these predictions will tell you that not only are they not right, they're usually incredibly, incredibly wrong, and yet these same institutions will come out and make these predictions every year. So we encourage you, you may listen to the predictions, but do not act on them as if they're gospel because they are probably going to be wildly inaccurate. Don't believe me. Stay tuned as I'm joined by fellow advisor Jay Waters and you'll see exactly what we're talking about. Welcome everyone to the Retirement Power Hour. My name's Joe Allaria, I'm your host alongside Jay Waters, my colleague and co-host, and this is episode 36. And Jay, we are back another year, another round of market predictions for 2025. We were here around this time last year talking about 2024. We will explain to the audience how that went and how those predictions fared, but good to have you back for this episode. 

Speaker 2 (01:27):

Yeah, thank you Joe. This is one of my favorite episode series that we do because year in year, I think it, again, we'll get into it. I don't want to spoil it, but it will show how much value this episode can bring. 

Speaker 1 (01:38):

On that note, Jay, we took listener feedback last year because the whole purpose of this episode is to help investors not take predictions and make decisions. So we'd like to give you the backdrop of, Hey, look at how these guys didn't in the previous year, and we spend time doing that, but one of our listeners said, geez, it took you 12 minutes to get into the current year predictions, which again, I don't know if he was here for the right reasons, Jay, but with that said, we're just going to go right into the predictions, everybody Alright for 2025, we have four institutions out of about 20 that we researched that think the s and p 500 is going to be anywhere from 15 to 20 plus percent positive for the year. And I'll just say, Jay, across the board, these predictions are incredibly positive, which again, we don't know what's going to happen. 

Speaker 1 (02:28):

Do not go and update your 401k right now just because I said that, but we have Oppenheimer, Wells Fargo, Deutsche Bank, and ya, Deni Research all think anywhere from 19 to just over 20% growth and the s and p 500 for 2025. Then we've got a slew of institutions who are in between that 10 to 15% range. We have B-M-O-H-S-B-C, bank of America, Barclays, RBC, Evercore, fundra, Ned Davis Research, CFRA, Morgan Stanley, JP Morgan, and Citi, all projecting the s and p 500 double digit growth, 10 to 15% in 2025. That is on the heels J of two years where we've had close to 25% growth in the s and p 500. So they're predicting a third strong year of growth. UBS was the loan institution that we found between that five to 10% growth range and they're projecting the s and p to grow by about eight 9%. Now, we had two institutions that are projecting a decline in the s and p 500 for 2025, and that is Stifel who is targeting a six and a half percent drop in the s and p 500 and then BCA research a little bit more bold here, 24% decline is what they are seeing. Jay for 2025, 

Speaker 2 (03:57):

You mentioned back to back years of around 25% returns, and historically that's only happened four times in history. And of those four times that third year, 50 percent's been negative 50% of the other time it's been positive. So most of all of these companies here are leaning towards one side of that coin toss. If it was more 50 50, it'd be understandable, but everyone's bullish here where historically shows we don't know what's going to happen. It's 50 50 shot 

Speaker 1 (04:25):

And of course history, Jay is no indicator of future results. There are always the unknowns that are out there that we don't know about. That's why they're called unknowns. We may not even know that they exist at this point in the year and something could happen and drastically affect market returns. We've got some other predictions too, aside from just end of year s and p 500 targets as well, Jay. 

Speaker 2 (04:51):

Yeah, we've got Ameriprise saying that real GDP will growth will actually decrease to 2% from 3% in 2025. Inflation will decelerate and the Fed will cut rates gradually over the course of the year. 

Speaker 1 (05:06):

And Jay Fed rate cuts and interest rates in general have been a constant theme for the last few years. I don't want to spoil this, but let's just say most people got it wrong. In 2024, Steven Wu, founder managing partner of Carthage Capital Management talks about volatility, says it's shaping up to be a volatile first half of 2025, which was that idea that sentiment was shared by Jeffrey Schultz, head of economic and market strategy at ClearBridge, thinking that tariffs could be extremely disruptive for markets and that markets would be choppy in the first half of 2025. So we don't know, but that's what they think on volatility 

Speaker 2 (05:52):

To kind of coincide with that. Then you've got Goldman Sachs coming out and saying that there is a massive 30% correction that is coming, it's coming, but when we don't know, I guess they're saying that is the 2025 prediction, but again, that's kind of a bold prediction. 

Speaker 1 (06:11):

You've got a lot of institutions, even Goldman Sachs themselves, which you brought up off air is predicting that the end of the year target again will be up by 10.5%. So you've got a team of analysts inside of Goldman Sachs saying, well, the downside risk right now is sitting at about 30%. You've got Goldman Sachs institution saying it's going to go up 10 and a half. Who's right? That's one company. Jay, these are two people inside of one company. Who are we supposed to believe? 

Speaker 2 (06:42):

Yeah, those are two very big different views too under the same umbrella. So again, that they're alone should tell you that no one knows what's going to happen because you got two people on the same team saying different things. 

Speaker 1 (06:54):

Right, and moving along with more predictions for 25 BCA research strategist Peter Zen expects global economic growth to slow sharply next year driven by a major global trade war. I love when it gets into specifics, Jay. I love the specific predictions because that's very easy to track initiated by the incoming Trump administration bears and also calls for a recession and for consumer spending to decline. So I'm looking forward to tracking that prediction and seeing how it 

Speaker 2 (07:28):

Goes. Then we've got Motley Fool and they've got a lot of predictions here. They're saying we will see a 20% correction in 2025 Crypto Bear markets will return. Healthcare is going to be the top sector that's really to track. Consumer cyclical will struggle. The Mag seven will underperform the s and p 500. Cannabis will rally vague statement, but they're bullish on it. Microsoft closes the year as the largest public company, which Microsoft makes up a part of that Mag seven. So they're assuming Mag seven is going to pull down, but Microsoft within that's going to really outperform those other six companies then for them to make that statement. So 

Speaker 1 (08:12):

Motley Fool always puts out the slew of predictions, as Bart Scott said, a famous NFL player, I'm going to quote him regarding tracking these and regarding seeing how these are going to go for the year. Can't wait, can't wait. We're going to track these throughout the year. Next we have Goldman Sachs, J 2025 they say will be the slimmest relative outperformance of the Mag seven, the magnificent seven since 2017. So we've got some of these institutions making predictions about the largest stocks in the s and p 500. Ken Fisher says the s and p 500 should lag European stocks of Ken Fisher of Fisher Investments. So he's pretty confident about that. You can go out and read it. I wouldn't encourage you to do that, but it's out there. Bank of America also thinks the, well, they think the magnificent seven will underperform the s and p 500 and basically that the equal weight s and p will outperform the regular s and p. So in essence, that's what we're saying, that the biggest stocks are going to underperform all the other stocks we shall see on that one. Jay, what about, we've got some about certain sectors of the market as well. 

Speaker 2 (09:31):

Yeah, we've got Howard Chan, founder and CEO of curve investment management. In quotes, we're likely to see a correction in tech, not a matter of if, but when on top of that, fixed income markets anticipate the Fed will cut interest rates in 2025, but not by much two rate cuts most likely, 

Speaker 1 (09:53):

Which I 

Speaker 2 (09:54):

Know that's a dangerous game just from what happened in 2024. And again, we'll get into all the predictions that were wrong in 20 24, 1 of those being around rate cuts. Then we've got bank rates, chief financial analyst, Greg McBride, who sees three or more cuts, likely taking it to three and a half or 3.75. 

Speaker 1 (10:13):

Yeah. Again, Jay rates, we've been guessing on rates for a few years now. So some people are continuing to do that along with rates, we're talking about the Fed funds rate. You've got mortgage rates that a lot of buyers, home buyers out there want to know what are mortgage rates going to do? Well, again, we don't know, and so take this with the biggest grain of salt that's out there, but Fannie Mae says that they expect mortgage rates to stay within six to six and a half percent for the next couple of years. So they may come down slightly, but they're going to stay mostly elevated when comparing to the last few years. Jay, I want to say this. If people are paying their advisor to be a future teller, a fortune teller, a soothsayer, then they're doing it wrong. And if you out there think that that's what your advisor's job is, I'm sorry, you're misinformed, you're off track. 

Speaker 1 (11:10):

That is not the job of a financial advisor despite the narrative, despite what people think, despite what your advisor may be telling you. Because as we're going to see here shortly, it is physically impossible for any one person to tell the future, and that's what you have to do. You have to know the future, everything in order to predict the future direction of stocks. If that's you, stop it. Go to retirement power hour podcast.com, click work with me, and we will show you what a real financial plan looks like and how you should develop an investment strategy based on your retirement plan, based on your financial plan, not on what Joe or what Jay thinks the market is going to do in 2025. 

Speaker 2 (11:59):

Yeah, great point, Joe. And I love the confidence that people do have that, but yeah, we don't know. It's great that people think that and that they have the confidence, but that's not what we do. 

Speaker 1 (12:09):

It's flattering, Jay, because I told the guy a few weeks ago as a prospective client who said, surely we being educated and experienced can tell or have a sense of what sector is going to do better in 2025 compared to him or the average person. And I said, well, thank you, but no, we have no clue what's going to happen. That's not what an advisor does. And I think that's a common misconception out there that just because we're in the industry that we know something that everyone else doesn't. We all have access to the same information today. Information is priced in so quickly to markets and to the price of a stock that it is, again, we would say physically impossible to grab information that everyone else doesn't already have immediately and to kind of capitalize on that. It just doesn't exist. And here's Jay, some great evidence of how it doesn't exist. 

Speaker 1 (13:13):

If you don't believe me, just stay tuned and listen to this next segment because we're going to cover how all these people did in 2024, and you'll start to see, wow, how can that even happen? How can these people be so wrong and they're these powerful financial institutions. So let's just jump into it, Jay. What actually happened in 2024, stocks were up 23 to 25% depending on if you count dividend reinvesting. But 23.3 without dividend reinvesting from the December 29, 20, 23 close. And again, bonds were up 1.3%, so bonds were up slightly. Again, how wrong were these predictors? A lot of the same companies, Oppenheimer, Wells Fargo, Deutsche Bank, BMO, a lot of these same players, how wrong were they? Let's ask first, was any one of those companies right in 2024? No, not a single one got the prediction right on what the market was going to do in 2024. How wrong on average were all of them? 16.63% wrong on average, meaning that the market went up 23.3% J. So 16.63, the average prediction was about 6.67% that they thought the market was going to go up, but the market went up 23 and a third. They were over 16% wrong, which is actually not too far off from how wrong they were in the past couple of years as well. Jay, in 2023, they were incredibly wrong. In 2024, same thing exactly happened. And so we continue to see it year after year, 

Speaker 2 (15:02):

And that's just how much they missed on the prediction of what they thought was going to happen. Best example I give here is the one that was actually the closest, and I use close loosely here, is Ardini Research assumed a 13.2% return last year, which again, we just said the market did about 23 to 25%. If you include dividend reinvesting, which means they were about 12% off, but 50% actually off the mark, they were 50% wrong, right? They picked half of what the market actually did. 

Speaker 1 (15:34):

Yeah, it's all about how you count the percentages, but that's a lot of points to be wrong. And then you look at some of these like, I'm sorry to pick name names here, but you look at Wells Fargo, you look at Morgan Stanley or JP Morgan who predicted almost a 12% decline in 2024, now the market was up 23%. Again, you're 35 points or percentage points off. If I went and moved my money to money market or bonds because I thought the market was going to go down 12%, now I just missed out on a huge return and it's really hard, Jay, to get that back unless I can somehow out time the market again in the future, which if I try to do that now I'm risking underperforming the market. So it's a very dangerous game to get into. 

Speaker 2 (16:23):

Shifting over, we've got BlackRock on things outside the market saying stocks and bonds will deliver positive returns and cash underperforms both as Fed pivots to the rate cut wrong US treasury bill one to three month return was 5.32% in 2024. Say another one talking on Mag seven. Again, same story about for 2025, what it was in 2024. A lot of stuff around the Mag seven and Morgan Stanley saying, diversifying away from the Mag seven and to go more value over growth. Wrong again, I love this. Mag seven returned 65% in 

Speaker 1 (17:04):

Speaker 2 (17:05):

Growth outperformed value 32% to 12%. So they were on last year. They're making the same prediction this year. And you know what? If you do make the same prediction year after year after year, you will be right at some point 

Speaker 1 (17:21):

Eventually, 

Speaker 2 (17:22):

But you may be wrong 10 times before you get it right. And at that point it's already too late. 

Speaker 1 (17:27):

And I got a couple here, one of them here we shared last year, Jay was correct. James Demmer, chief investment officer at Main Street Research said the AI fueled bull market could just be getting started at the beginning of 2024, and he was correct AI stocks as measured by the Morningstar Global Next Generation Artificial Intelligence Index. That's a mouthful. Jay climbed 37% in 2024, so it outperformed the s and p, but now we're back to Jeffrey Buck binder, chief equity strategist for LPL Financial who made a prediction about stock market volatility in 2024. He said, just get ready. Coming up with the election, stocks are going to be very volatile. Wrong. Stock market volatility was extremely low in 2024. In fact, the vix, the Volatility index reached its lowest mark on average for the year. The average was 15.5 for the VIX for the year, and that was the lowest we've seen since 2019. 

Speaker 1 (18:33):

So a five year low in volatility. And so it's just something that someone out there in the universe says every year that, oh, we're going to have a ton of volatility. I think you should always be ready for volatility. I think you should have a plan for volatility, but we don't know if it's going to be volatile. We could be like 2024, could be like 2023. We don't know that we should have a plan. But again, don't make a prediction. Don't go scaring people into moving their money into cash because you say that it's going to be volatile. 

Speaker 2 (19:09):

And I think it's easy to have a short-term mindset of what volatility is because I heard last year from a couple of people say, man, this year's just been so volatile. It seems like with the election, everything else, and actually this is the lowest year for volatility we've seen in a long time, and it's easy to forget sometimes what real volatility looks like. 

Speaker 1 (19:31):

It's not the news cycle. We're looking at what is the market actually doing. 

Speaker 2 (19:35):

Actually doing the 

Speaker 1 (19:36):

News cycle with politics can seem very volatile. But yeah, absolutely, Jay, let's spread the truth. No, it's not. It wasn't volatile hardly at all. It was a very easy year in the market, just for the most part, kept climbing, not a lot of volatility. I'm going to let you tell us how the Motley Fool did in 2024 J. They had a list. Again, a bunch of predictions. How'd they do? 

Speaker 2 (20:03):

Yep. I'll give them a little leeway here. Motley Fool Economy said that they'll dip into recession. No beer market returns in 2024, no yield inversion will end. Yes, that was true. So that's why I say give 'em a little leeway. They got a couple of things, but mostly wrong. For the most part, REITs will thrive, not correct. Core inflation will remain stubbornly high, if not accelerate, not really. Again, give them a maybe. 

Speaker 1 (20:40):

Inflation came down and it climbed back up in the latter half of the year, but about where was at the beginning. So we definitely didn't see it re-accelerate back to 9% like we were a couple of years ago. Is it stubbornly high? Well, the Fed wants it to be at 2%. It's not at 2%. So again, we'll give them a maybe on that one. 

Speaker 2 (21:02):

They also have on here, the AI bubble will begin to burst, which we just said earlier, didn't see 

Speaker 1 (21:07):

That 

Speaker 2 (21:08):

Complete opposite of what another analyst said, them actually being, right? It climbed 37%. Utilities will be a top three sector in 2024 incorrect. And then Tesla will fall below a hundred dollars per share. Extremely incorrect. Actually, Tesla did phenomenal last year and did very, very well. At the end of the year, 

Speaker 1 (21:30):

Nowhere close to a hundred dollars a share, 

Speaker 2 (21:32):

Nowhere close. 

Speaker 1 (21:33):

Here's one of my favorites. And again, I'm not trying to pick fights, I just have a big problem with people that do this. So I'm taking the gloves off for a second, but Harry Dent told Fox News Digital, I think 2024 is going to be the biggest single crash year we'll ever see in our lifetimes. It's going to be more in the 1929 and 1932 level. That's an 86% crash in the s and p and a 92% crash in the Nasdaq crypto is going to crash 96%. And real estate, by the way, is only projected by me to go back to its 2012 lows, but that's a 50% crash for the average house, which went down 34% in the last crash. More than the Great Depression, more than any time in history. What's going to hurt people the most? How irresponsible of Harry Dent to spread that junk? 

Speaker 1 (22:23):

Just absolute garbage, not even close to being true. And if you look back at a, you can track his historical predictions and what you'll find, to your point that was made earlier, Jay, if you make the same prediction enough, eventually you'll get it partially right? And what this guy does is he goes out basically every year, every other year and makes these historical predictions about how it's going to be a huge crash and huge market downturn, blah, blah, blah. And then in 2008, when it finally happens one year out of 25 years, he looks really smart. If you pay zero attention to all of his other predictions that are wrong, then he looks like the guy that called the crash, and it is just a crock, Jay, I'm sorry. He'll try to write a book on it, and he did write a book on it, and it's just an absolute bag of garbage. That's what it is. Anyway, 

Speaker 2 (23:20):

Statements like this, like you said, it's so irresponsible because it just takes one person to listen to it and go all cash or listen to that recommendation, and it can be completely detrimental to their financial plan if they listen to somebody like this. 

Speaker 1 (23:36):

If I wanted to get on TV and sell books and all that, I would do the exact same thing. So I guess we shouldn't fault him for being selfish about his motives. And if you see this, Mr. Dent, come on the show, let's talk about it because I'd love to have that conversation. A couple shout outs on the positive side, we're going to end it on a high note. Jay George Mateo, CIO at Key Wealth says there's too much precision placed on these targets, meaning the end of year targets to really be meaningful. It just sums up an illusion of precision, meaning that nobody can be that precise about where the market is going to be 12 months forward. And you know what? I applaud you, George, for those comments. Someone bringing common sense into the world. Thank you. Nationwide. Chief market strategist, mark Hackett also wrote an article, some bullet points I pulled from it. First one says, predicting where the stock market will be a year from now with any accuracy is a challenging endeavor. Wall Street stock strategists have underestimated s and p 500 index returns in 13 of the past 16 years, missing year end price targets on average by approximately 10%. And that's it. I mean, if that doesn't tell the story I give up, Jay, there's nothing else that we can do. Final thoughts from you as I need to take a deep breath here and calm down. But final thoughts, Jay, what do you think? 

Speaker 2 (25:03):

Yeah, I mean, hopefully this is evident enough to everyone watching this, listening to it, whatever it is. Not to put too much stake in what all these financial gurus say on what's going to happen in the market. Most of the time they're probably selling something, selling a product, selling a book, a video course, whatever it may be. They're most likely selling you something to drive that fear into you, to get you to come back and listen more and more or buy something. So use this as evidence to not listen to any of those people, because most likely it is not going to work out well. 

Speaker 1 (25:41):

It's black and white, Jay, that's why I love it. It's just the data. Just look at it. If you want to know what a financial advisor is actually supposed to do for you, and you've always been in that camp of thinking that the advisor's supposed to be able to tell the future and pick stocks, go to retirement power hour podcast.com and click work with me, and you can set up a phone call. We'll have an initial conversation, and we will explain to you how to build again, an allocation built on your financial plan, your retirement plan, and create an asset allocation that makes sense for you. Not one based on hunches that we may have or thoughts that we may have, but one that's based in data and also supports your specific situation. How long until you retire, how much money will you need to withdraw your allocation needs to support those things. 

Speaker 1 (26:35):

So there's a very fundamental way to build that retirement plan and to build your investment portfolio when you look at your specific situation, Jay, that's how it's done right, as you know. And we are both happy to have those conversations with you. If this was helpful, if you enjoyed the show, feel free and please do leave us a review or you can leave us a comment. We're big boys. If you disagree, go ahead and comment below on our YouTube video. And it's hard to argue data, but I mean, that's the only reason I'm being so strong on this. But if anyone has any countering points, please share 'em. And with that, we will look forward to seeing all of you in our next episode on the Retirement Power Hour, where we help listeners invest wiser and retire better.