U.S. stocks finished 2024 with impressive performance, with the S&P 500 delivering a 23% gain to post the best two-year return since the late 1990s.
Looking ahead to 2025, the picture is equal parts rosy and risky, according to Bob Doll, chief investment officer of Crossmark Global Investments, who released his annual market predictions just ahead of the new year.
The key questions for 2025 are whether the economy, earnings, the Federal Reserve and the new presidential administration can deliver another strong year for investors, Doll said. His confidence comes from the fact that the U.S. economic expansion is “alive and well,” despite considerable policy uncertainty.
“2024 was more favorable to equities than we thought,” Doll observed. “U.S. consumer spending held up, the labor market improved early in the year, and U.S. economic data surprised to the upside.”
However, labor demand weakened after the first quarter, to the point that the Federal Reserve felt it needed to cut interest rates by 50 basis points in mid-September to prevent a recessionary rise in the unemployment rate. In Dolls view, this trend in the labor market still shows the Fed has not yet definitively secured a soft landing.
Also worth noting, according to Doll, is the much-discussed fact that outsize equity returns in 2024 have occurred not just because of positive earnings growth, but also because of significant multiple expansion and the ongoing concentration effects of mega-cap tech companies.
Ultimately, Doll’s theme for 2025 says it all: “Fewer tailwinds, more tail risks.”
See the slideshow for a review of Doll’s 10 2025 predictions.
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