5 Bold Predictions for the Stock Market and More in 2025

As the new year approaches, it's time to make some bold predictions about the stock market, economy, interest rates, and more for 2025. These predictions aim to provide insights that may go against the prevailing thoughts among analysts and Wall Street experts.

Before diving into the future, it's essential to evaluate last year's predictions to hold myself accountable. In 2024, I made five key predictions:

1. The stock market will have a strong year. The S&P 500 performed exceptionally well, far exceeding analysts' expectations with a 28% gain.
2. Small-caps and value stocks will outperform. This prediction was incorrect, as big tech companies thrived thanks to advancements in AI, meaning small-cap stocks underperformed compared to the S&P 500.
3. Mortgage rates will plunge into the 5% range. This prediction almost came true when rates approached 6.1%, but did not drop into the desired 5% zone.
4. Home prices will increase by a "mid-single-digit" percentage. Contrary to expectations, home prices rose nearly 3%, validating this prediction.
5. The Fed will cut rates eight times. While some cuts did occur, this prediction was overly ambitious as the Fed's actions began later in the year.

Reflecting on last year, I was only correct on two out of five predictions. I've had better years, such as in 2022, but making bold predictions is inherently risky and challenging.

5 Bold Predictions for 2025

Now, without further ado, here are five bold predictions for 2025 that I believe have a greater likelihood of occurring than many analysts anticipate:

1. We might see a full percentage point of rate cuts from the Fed. Following the latest meeting, there seems to be a belief that cuts will be minimal in 2025. However, I anticipate that a mix of low inflation and economic uncertainty will push the Fed to cut rates more aggressively.
2. Small-cap stocks will finally outperform the S&P 500. Small caps, currently trading at their lowest valuations relative to large caps in a quarter-century, are primed for growth. If interest rate cuts and economic revival align, we could see small-cap stocks excel.
3. Real estate will emerge as the top-performing S&P sector. Given that real estate investment trusts (REITs) are sensitive to interest rate changes, a series of cuts could significantly boost this sector.
4. The S&P 500 is likely to have a mediocre year. While many analysts predict strong single-digit gains, I foresee a more muted performance of around 4% to 8%. The mega-cap tech stocks may not sustain their momentum, affecting the index's overall performance.
5. Speculative stocks might make a comeback. While I don’t foresee a repeat of the "SPAC Boom", there could be a rise in interest in speculative investments, as seen with companies like Upstart and Lemonade.

Expecting to Miss a Few

Again, it’s essential to stress that these are bold predictions. I’m not expecting all five to come true, but I believe they have a better-than-average chance of playing out in 2025.

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