5 Year Stock Market Prediction

5 Year Stock Market Forecast

Quite a few investors are taking refuge in the long 5 year to 10 year investment term to avoid the current volatility and perhaps market downturn.

As you’ll see below, the sentiment might be for low growth till 2025, and then a disappointing slide into very low growth. For a nation in deep debt, needing infrastructure growth, and pushing for alternative energy sources only, it paints a grim picture. Who would invest in this environment. Experts are advising investing large cap international stocks because they lack long term vision even with their forecasting apparatus.

It’s immensely difficult to predict that far ahead even for the biggest investment firms blessed with AI technology. Guessing political, weather, trade agreements, and technology developments is difficult.  But we can see government debt, global market access, demographic changes, and all data that is consistent with post recession phase growth.

We’re at the end of a 14 year bull market, so what will happen after this one to two year balancing of the economy? Will the Russia trade blockade happens, will energy become cheap as dirt?

After 7 Trillion in spending, US consumers are still optimistic and have plenty of household wealth and jobs. Is inflation enough to destroy the 5 year economic outlook?  Probably not.  You can invest in good dividend stocks, growth stocks, or even bonds and you may ride this storm out.  US dollars are likely not a good place to hide, given the dollar will fall back to earth in the next few years.

After the Recession, The US Economy Will Return

It’s reasonable to most that the five year to ten year forecast period will be brighter than this short term forecast, but will it? Certainly governments have learned what stimulus spending will do and they might keep doing it — given US consumer wealth and income may wane in the coming 5 years.

Debt financing problems will mar the long term outlook, as will competition from China, Vietnam, Taiwan, and emerging markets, but US equities likely will still be the place to put your money (unless you’re buying real estate).

The 3 month to 6 month outlooks and are troubled and most expect the next two quarters to be a bottoming out period where investors get to hunt for bargains to buy the dip.

Right now, you’re looking to get back into stocks yet finding those equities that will survive the next 16 to 30 months isn’t an easy task. You could stick with the FAANG, or top 100 S&P stocks and you’ll likely survive in tact. This is the strategy for most investment firms, so they don’t really have any better grasp of the future of the stock market. Otherwise, they’d be picking some good horses to bet on.

What’s the Next 5 Years Going to be Like?

The chart from the conference board seems to show that the 2021 year of trillion dollar stimulus has spoiled markets and businesses who didn’t have to compete hard to win. By 2027, the question of US competitiveness will be answered.  Some experts are advising in overseas investments, but it won’t be Europe which appears to be headed for chronic economic turmoil and suffering.

As the chart shows, starting this year a pronounced drop in GDP, real disposable income, residential investment, will be countered by lower imports, falling inventories and rising government spending. But will the current government be in power after 2024?  Will a new government lower taxes, favor business, and strengthen commitment to US Companies. That would change all projections.

There are forecasts for tomorrow, 2023, next week, next 3 months, next 6 months, and now the 5 year and 10 year long term views.  We know technologies such as green energy, 5G, blockchain, AI, and others will only grow and generate further advantages.

With Fed spending tapering, mountainous debt, rising interest rates, stagflation, and geopolitical strife there is a lot that could happen in the next 5 years.  The greater point is that most stocks will not be gaining much in the next few years. Profitability doesn’t look strong and Goldman Sachs is saying most of its profits will come from dividends payouts.

What’s supporting a good 5 year to 10 year stock market outlook is the huge Millennial generation along with a sizable Gen Z population who are already buying homes. In 5 years, their own kids will be an economic force shaping demand and spending choices. If this recession of 2023 is quick, it would the forecast for 2027 looking much better. Choose your stocks well, from those with solid balance sheets, in markets that will grow, and you might come through this next stock market crash to reach 2027.

Start Investing for the 5 to 10 Year Period?

Investigating the 5 year or 10 year outlook is a sure sign you’re a wise investor. After all, if you don’t know what’s ahead for US business, then all of your investing is basically gambling (i.e., Bitcoin). You have to know which stocks are long term investments and be certain about when you’ll need to dump some of the speculative stocks you have now.

Would you rely on an AI stock prediction service for your 5 year outlook? Of course not, because the driving factors are human and emotional.

Just for context, here’s what’s happened in stocks the last 5 years:

Stocks last 5 years. Screenshot courtesy of Barchart.com

My 5 year market forecast is for continued but modest growth beyond 2023, and I believe the US government will tackle the China problem, because they have to. The issue of competing with China and feeding the trade deficit will have to be dealt with.

The 5 Year US Outlook is Not Booming

The US stock market has outperformed most of the experts predictions for 2021 but put that out of your mind.  2022’s downward trajectory looks like it might continue through 2023 and perhaps into 2024. Rising rates will generate a lot of needless misery for everyone.  Unless there is political change, the rising Fed interest rate gambit will result in higher unemployment, a higher US dollar suppressing exports, reduced investment, demand for cheap imports, and reduce consumer spending leading to lower US corporate profits.

Experts believe the 5 year outlook will be of lagging GDP, lower demand, and weak profitability.

Everyone wonders what will cause the next stock market crash because there are so many working parts. The biggest danger is political tactics made because they have to do it (e.g., global interest rates head upward, dragging the US with it, while raising interest rates is needed to pay down massive US debt).

The Bureau of Economic Analysis forecast rising real GDP until about 2027, when it begins to tail off. This suggests the 10 year period is looking dour. A lot depends on US commitment to technology, American productivity, reshoring manufacturing, lowering taxes, and leveraging cheap carbon energy.

CBO offer’s their projections for the 5 to 10 year period ahead. Their projections are for lower unemployment, lower interest rates and higher corporate profit after 2025.

Long Term Economic Projections. Screenshot courtesy of CBO.

US Trade Deficit Hit $80 Billion

The balance of trade deficit is improving since the spring of 2022, however it has grown $10 billion from last year. A growing issue with import costs means the US is losing money which means lower domestic spending, higher unemployment, and troublesome long term national debt to finance.

US balance of trade 10 year chart
US balance of Trade. Screenshot courtesy of TradingEconomics.

As I mentioned two year ago the stock market predictions for 2022/2023 some big corrections would happen. Perhaps in October, we might see the first. The big event comes in December of 2022 with the mid term senate and house elections.

The US is battling China, because China is positioning to take all the global trade marbles for themselves and leave the US and Europe out in the cold.  China is suppressing its economy right now due to the cost of materials including coal, lithium, copper, steel, oil and natural gas. As its economy resumes in 2023, demand will grow and inflation will jump.

This will cause the current President and the Fed to overreact and raise interest rates.  This is why the next 6 months will provide outstanding buying opportunities for those with 5 to 10 year investment horizons.

Fantasy Economic Ideology Comes Crashing Down

We’ve seen the current US administration juggling endless tactics including free cash giveaways, stimulus trillions, and social re-engineering that are too far ahead of themselves (green energy, crushing US energy production, raising taxes on the wealthy). Some of these initiatives may help (supporting the burgeoning poor, building new infrastructure, encouraging renewable technology) but where is help for housing which is actually supporting the economy?)

The 5 year forecast period is one where the Dems will disappear from the Federal scene, which means we should look to Republican economic policy for guidance on the 2025 to 2027 period.

We should see some good periods for the Russell 2000 and S&P small caps, but it’s a tough life for small business. The government simply isn’t intelligent enough to know how to grow small business without alienating big business and causing stock equities to suffer. Between a rock and a hard place. Yet small business drives employment.

Check out Tesla, Bitcoin, 5G, Google, Apple as they likely will continue to perform well.  Some believe oil stocks will do well for another 5 years.  And if the stock market does crash, it will likely return by 2025 and even out nicely by 2027.

Enjoy the rocky road ahead. See more on the stock market forecast, stock market today, and what drives the S&P, Dow Jones, NASDAQ and Russell indexes. The broader you’re knowledge and the more diverse your perspective, the more likely you are to avoid picking stocks you should sell, and find the best stocks to buy for the next 5 years.

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