- After two consecutive years of outsized returns, it remains to be seen what U.S. stocks can deliver in 2025. The easy-money bet would be for increased volatility and lower returns in the upcoming year. However, you could have said that about 2024 as well.
- There is currently nothing in the crystal ball to suggest international investments will significantly outperform U.S. ones. There isn’t a legitimate threat to the dollar’s hegemony, and the U.S. economy is poised to outperform the remainder of the G-7 for the foreseeable future.
- Any hiccup in the U.S. equity market during the first half of 2025 will hit crypto markets like the flu. This is getting to be a pretty predictable cycle of wild rallies, sharp crashes, and prolonged stagnation —on repeat. Expect a return to sanity in 1st quarter.
- The Bureau of Labor Statistics (BLS) and Bureau of Economic Analysis (BEA) will make negative revisions to the employment and Gross Domestic Product (GDP) data. Neither will end up being as strong as originally announced, and a lot of people will call it a conspiracy.
- At over $36 trillion and counting, the U.S. Treasury can ill-afford to have long-term interest rates get too high. The debt service will simply be too much. Expect the Federal Reserve to announce it is going to stop balance sheet reductions at some point in the New Year. It is only a question of timing. This should be enough to keep long-term rates from climbing significantly higher.
- It would require divine intervention for Justin Trudeau to remain prime minister of Canada throughout 2025. In fact, he might already be out of office by the time this magazine goes to print (as I type this on 12/23/2024). So could a lot of other world leaders. Such is the crisis of global leadership (or lack thereof).
- The Republicans will likely squander their opportunity to fully consolidate their power by fighting amongst themselves. If they are smart, the Democrats will use the time in 2025 to recraft their message and elevate electable future.
- Internet, semiconductor, software and computer stocks combined make up well over 40% of the S&P While they’ve fueled much of the U.S. economy’s growth, the yawning gap between growth and value stocks will have to converge at some point in the not- so-distant future.
- Donald Trump has promised he will do a zillion different things in his second term as president. He won’t be able to deliver on many of them. No one could. This will cause some disappointment amongst his supporters, and a sense of relief from his detractors.
- By hook or crook (don’t ask which), the U.S. will make significant progress toward ceasefires in both Eastern Europe and the Middle East. A ceasefire, however, is one thing and peace is There will never be true peace in either of those regions as long as all sides remaining standing.
- In 2025, it will become even more obvious the U.S. electrical grid is unprepared for the new economy. Electric vehicles, data centers, accelerated computing and other forms of artificial intelligence consume an enormous amount of energy. Almost ironically, California, where a lot of the new technology originates, will experience the most disruptions from power outages and brownouts.
This content is part of our quarterly outlook and overview. For more of our view on this quarter’s economic overview, inflation, bonds, equities and allocations, read the latest issue of Macro & Market Perspectives.
The opinions expressed within this report are those of the Investment Committee as of the date published. They are subject to change without notice, and do not necessarily reflect the views of Oakworth Capital Bank, its directors, shareholders or employees.