We hope everyone had a great holiday with their families. One last celebration tonight and we wrap up an eventful 2024.
The markets are going to end the year up double digits, with both the S&P and NASDAQ gaining close to 25% on the year as of this writing. This is second great year in a row for the stock market.
Can the market keep going up at this pace? Perhaps surprisingly, yes. Secular bull markets like the one we’re in now can last more than a decade.
So what might 2025 bring for investors? Goldman Sachs thinks the combination of lower inflation, continued Fed interest rate cuts, and a strong consumer will keep the US economy chugging along.
The US Economy is Poised to Beat Expectations
But we know that there’s always something out there that could derail that outcome. Apollo lists 12 risks to the economy next year, with Tariffs and potential Nvidia earnings disappointments being the highest concern.
But the biggest concern from our perspective? A concentrated stock market trading at close to record valuations. The forward price/earnings ratio is the highest it’s been since 1999.
Most of the heavy lifting in the year-to-date returns of the S&P 500 came from just 8 stocks. Just as they added to returns this year, any disappointment in their 2025 earnings or future guidance would spell bad news for the index.
Even with those risks, if you told us that we’d be in the position we’re in now on Jan 1, 2024, with an all-time-high stock market, inflation subsiding, low unemployment, and no recession in sight, we’d take that every time.
Here’s to a healthy and prosperous 2025!
