5 Bold Predictions for the Stock Market and More in 2025

Every year, I share bold predictions about the future of the stock market, economy, interest rates, and more. These predictions are meant to be bold, meaning they challenge the general expectations of most analysts and experts on Wall Street.

Before making new predictions for 2025, it's essential to reflect on my previous predictions from 2024 to evaluate how accurate I was. Here’s a quick recap:

• The stock market will have a strong year. I anticipated an 8% gain in the S&P 500, but it ended up soaring 28% by late December. This was a successful prediction.
• Small-caps and value stocks will outperform. I was incorrect since I underestimated the performance of big tech stocks. The Russell 2000 small-cap index lagged behind.
• Mortgage rates will plunge into the 5% range. Although rates got close to this mark at 6.1% before cuts began, they never quite made it to 5%.
• Home prices will increase by a mid-single-digit percentage. Contrary to predictions by sources like Zillow, which forecast a decline, home prices rose nearly 3%. This prediction was accurate.
• The Fed will cut rates eight times. This was overly ambitious, as the Fed began cutting rates in September but not as early as I predicted.

Looking back, I was right on two out of five predictions last year, which is not my best result. The most accurate previous year saw four out of five being correct. Remember, though, these are called bold predictions and they aren’t meant to be easy to anticipate.

Ultimately, my goal is to consider potential developments for 2025 and here are my five predictions:

Five Bold Predictions for 2025

1. We will see a full percentage point drop in interest rates. Following the last Federal Reserve meeting, predictions for rate reductions became less optimistic. Most analysts are only expecting a small rate cut before 2025 ends. However, I believe we will see a full percentage point reduction due to slow inflation data and economic uncertainty.
2. Small-cap stocks will finally surpass the S&P 500. Small-cap stocks have been underperforming recently, but if my prediction about rate cuts is accurate, conditions could favor their growth in 2025.
3. Real estate will outperform. Following my interest rate prediction, if the Fed cuts rates aggressively, real estate investment trusts (REITs) could see significant benefits among S&P sectors.
4. The S&P 500 will post modest gains. Many analysts might predict strong double-digit gains in the S&P 500, but I think a single-digit gain between 4% and 8% is more realistic. I expect mega-cap tech stocks to underperform slightly after their strong rally in 2023 and 2024.
5. Speculative stocks will experience a revival. I'm not suggesting another massive boom like the one experienced with SPACs, but the appetite for speculative stocks appears to be increasing, as evidenced by the strong performances of companies like Upstart and Lemonade.

Expectations and Realities

As highlighted, I don’t think all five predictions will be accurate. The nature of bold predictions is that they come with uncertainty. However, I believe these possibilities have a decent chance of unfolding in 2025, more than what’s currently anticipated by many analysts.

stocks, predictions, economy