- Last quarter, we predicted that excess levels of debt, bloated central bank balance sheets and declining investor confidence in public institutions could support continued strength in precious metals. This quarter, we get to add another factor from the September Federal Open Market Committee: the Federal Reserve has finally begun cutting interest rates.1 In short, the case for gold and other shiny stuff is arguably still there.
- Unless something dramatic happens in October, Zohran Mamdani, in our opinion, is well-positioned to win the New York mayoral election in November. If and when that happens, the country — and perhaps the world — will anxiously wait to see if he can enact his aggressive progressive economic agenda. It could set the tone for discussions in the national mid-terms in 2026.
- If China were wise, it would quietly, and as surreptitiously as possible, build up its military and let the West tear itself apart at the seams. As Chinese general Sun Tzu wrote in The Art of War: “… the opportunity of defeating the enemy is provided by the enemy himself.”
- No matter what the Fed does with the target overnight lending rate between now and the end of 2025, the cost of domestic beef isn’t coming down significantly. According to the American Farm Bureau, the supply of beef cattle simply cannot grow that fast that soon. So, Americans will just have to grin and bear it at their tailgates and barbecues for a while longer.
- Unless a new “must have” technology or product magically appears in a short period of time, the 2025 holiday shopping season will likely disappoint. U.S. consumers are still worried about inflation and aren’t as secure in their jobs as they once were. Adding to this, as reported by PwC, younger generations seem to favor “experiences” over things.
- A permanent conclusion to the wars in either Gaza or Ukraine by the end of 2025 is highly unlikely. With the so-called global “court of public opinion” largely on their side, the Palestinians and Ukrainians will continue to fight as long as possible. For their part, neither the Israeli nor Russian governments can run the political risk of compromising while they have the military advantage. It is our opinion that this is a real problem.
- By year-end, the run-up to the May 2026 local elections in the United Kingdom (UK) will already have reached a fever pitch. Ultimately, it will serve as a referendum between Labour and Reform UK. By next spring, many will view these elections as potentially the most important in the history of the UK.
- The September collapse of subprime auto lender Tricolor could be a proverbial canary in the coal mine for the sector as a whole. This collapse comes as the entire industry struggles with tariffs and declining profitability. At best, the sector will likely close 2025 with less confidence about the future than it would like.
- Unless something unforeseen happens, the Federal Reserve would like to reduce the target overnight lending rate to 3.0-3.5% by the end of 2026 (as projected in the FOMC’s dot plot)—assuming U.S. inflation allows it to do so. The problem with forecasting inflation is the uncertainty of tariffs on consumer prices, and the fact that U.S. producers aren’t as in control of their inputs and supply chains as they once were.
- If predicting inflation has gotten difficult, so too has forecasting longer-term interest rates. Typically, long-term rates reflect future inflation expectations. The question then remains: Will the bond markets be able to handle the continuous surge in new Treasury supply without pushing rates higher? Time will tell.
- Questions about AI will continue to build, most of them negative. What is the true industrial demand for AI? How much is circular? How many jobs will AI kill? How will this impact the U.S. economy? Will this economic slowdown cause the Federal budget deficit to explode? While these are legitimate and potentially painful short-term concerns, AI is here to stay, and the long-term innovations will be awesome.
- Holiday box office hopes are falling on Avatar: Fire and Ash, Zootopia 2, The SpongeBob Movie: Search for SquarePants and Five Nights at Freddy’s 2. Obviously, all of these are sequels or spinoffs. Hollywood is betting on repeats. And who says creativity is dead?
- Finally, on December 31, the year 2025 will mercifully end.
Year-End Predictions, 2025
