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I have been publishing my Fearless Forecast for more than 30 years. I don’t know many or really any other advisor that sticks their neck out like this year in and year out. That’s one of the many reasons why we are different. I love producing original content, especially when it flies in the face of consensus or conventional wisdom. Our industry has a lot of lazy people. I don’t know how individual investors tolerate and accept the regurgitation of nonsense by advisors who simply do not do their homework.

Back to the forecast.

Over the decades, I have been surprised at how accurate our forecasts have been, even though we absolutely do not manage client portfolios according to my forecast. It’s an annual exercise that I enjoy, but it doesn’t amount to much more than that. And unlike the high priced Wall Street strategists who are usually wrong early and often, I do not change my forecast once it’s published. I live with the successes and failures.

Think of all the strategists in 2024 whose average target was 4900 on the S&P 500. The index closed at 5882. Julian Emanuel was firm at 4750, among the most bearish strategists until he changed his target during the summer to become the most bullish strategist on Wall Street. No remorse. No mea culpa. Just amnesia and revisionist history. Other bears weren’t so lucky. Mike Wilson, Tony Dwyer and Marko Kolanovic lost their jobs. All super nice guys, especially Tony. But Wall Street punishes bears who get it wrong for long.

Don’t get me wrong. Every forecast I have done wasn’t as successful as 2023. I laid a giant egg in 2002, my worst call ever when I was looking for the S&P 500 to bottom in the first half of the year around 900 and rally sharply to year-end around 1100. I owned it. I lived with it. I moved on.

Coming into 2023, I said that I never had higher conviction for a forecast since I started doing them in 1990. In real time, I forecast a new bull market beginning in Q4 2022 that could take the major stock market indices to fresh all-time highs by the first half of 2024. I thought there was an outside chance at a +30% year for the S&P 500. No one was as bullish as I was.

While I remained steadfastly positive for 2024, I tempered my enthusiasm and saw an 11-15% return for the S&P 500.

Without further adieu, here is Fearless Forecast 2025 – The Year Momentum Died. I am covering the equity markets first.

2025 will look nothing like 2017, the previous first year of President Trump and one of the popular refrains I hear. 2015-2016 saw two double-digit stock market corrections with the market essentially going nowhere for two years. The economy was limping along. The Trump victory was a shock to the financial system. True animal spirits were unleashed because of massive deregulation and epic tax cuts. That’s why 2017 was such an outstanding year.

I do not see 2025 as resembling 2017. 2023 and 2024 were historically strong years for the stock market. While not impossible, it would be difficult to tack on another strong year although detractors could point out that 1995, 1996, 1997, 1998 and 1999 all delivered returns in excess of 20%. Boy, would I sign up for that again!

1995 +37.58%
1996 +22.96%
1997 +33.36%
1998 +28.58%
1999 +21.04%

I do not see another round of animal spirits because although stimulative deregulation is coming right out of the gate, there will not be a massive tax cut to juice the consumer and economy. Furthermore, leaving politics aside, deportations, whether mass or targeted, will likely have a negative economic impact. And while I believe tariffs will be more bark than bite, I do think they will shave some number of basis points off of GDP growth. Let’s call it 0.50% for arguments sake. Today’s economy already has good, solid growth at roughly 3%.

2025 will look nothing like 2024; I am sorry to say. The last two years have been so relatively easy. All you had to do was buy any and all weakness, add beta and enjoy the momentum ride. 2025 is the year momentum dies. By that, I mean that the market will be less linear. Buying strong momentum will not work. Making a lot of money will be difficult. I am looking at buying weakness and selling strength as the mantra for 2025. More quaintly put, people like to say, “buy the dips and sell the rips”.

2025 is also a year ending in “5” which really should be irrelevant. However, years ending in “5” do have a history of delivering abnormally high returns, at least they used to.

1955 +31.56%
1965 +12.45%
1975 +37.20%
1985 +31.73%
1995 +37.58%
2005 +4.91%
2015 +1.38%

On the surface you might conclude that any year ending in ‘5” is one to close your eyes, buy and be rewarded. That’s obviously not the case. And you will notice that 2005 and 2015 were nothing to celebrate. I remember the fanfare and hoopla going into 2005 because of how well the previous “5” years ended.

When all is said and done, I see a frustrating year that feels worse than it is with at least one 10%+ correction lasting at least two months. The S&P 500 ends the year up mid-single digits with an outside chance at upper single digits. Momentum investing will not be your friend.

Breaking the year down, the stock market should struggle in Q1. The confirmation should be a close below the lowest point in December by the major stock market indices. If and when that happens I would start to sell strength. Fresh, all-time highs in Q1 are likely to be non-confirmed by most conventional and proprietary indicators. If I am wrong about Q1 then look for a deeper decline in Q2.

Stay tuned for part II where I dive into which sectors should lead in 2025 along with energy, interest rates, the Fed and economy.

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