I would prefer to write an article on the 10 biggest things people get right with their wealth but...

As we end 2024 with another good year and start talking expectations for 2025, it is important to remind people of the article I wrote in January of 2024. In that article I wrote, “the experts rarely get it right. This is not because of some deficiency in intelligence or information. It is because the markets are not predictable.” To reinforce that point, I stated the top 8 banks predictions for the S&P 500 for 2024. The high was a little less than a 10% return with the worst being a 20% decline. Not one of them came close to the 20%+ return we witnessed.
Our call for the 2024 year was “cautiously positive,” as noted in my January “2024 Market Expectations.” We also undersold the potential for the year. The good news for 2024 was the A.I. market explosion. The bad news is the market breadth, or depth of the rally, still was not good enough. The market is still top-heavy.
This is one of the reasons we go into 2025 with the same mindset, cautiously positive, albeit a bit more cautious. There are multiple reasons for being cautious going into 2025, with the first being valuations.
Since I prefer to end with the positives, there are also very solid reasons to be positive about the markets in 2025, which I outline below:
I expect some downside volatility in the first half of the year but for the market to be stronger in the second half. I do not believe we will see any major correction, unless caused by a black swan event. I expect a single digit return for 2025.
If you are wondering, the top 8 banks have predicted 2025 to be up from a range of 20%, which are Oppenheimer’s and Wells Fargo’s call, to approximately 10% from the remaining 6 top firms. Unlike last year, there is not much variation in the predictions, with none of them being negative. I do not know if that is good or bad news.
Whatever you think of 2025, we know trying to time the market does not work long-term. Prudent investment strategy includes staying invested since no one really knows where the market is headed. One can get more conservative by over-weighting in low volatile and dividend paying stocks. At least give yourself a chance if you’re wrong and, at the same time, trying to protect some the downside.
Finally, fixed income might finally be worth adding more to a portfolio, as long as the fed doesn’t start discussing raising rates. More likely rates stay relatively flat, which means you can expect higher interest payments from the bonds without the principal reduction due to higher rates. If rates do drop more than expected, you should expect some principal gains.