Stock Market 2025

Bull Market Continues into 2025?

2024 was a record breaking year for the S&P, NASDAQ, and Dow Jones listed stocks.

But will 2025 see the bull market extend to produce even more for investors?

Overall, signals suggest it will be a great year. We still have the next 6 months to endure, but it’s widely expected by economists that the US FED will lower the central bank rate, perhaps by 2% by next summer. That would be good news for the economy and US businesses.

A Big List of Positive Factors Fueling Optimism

The FED rate is the number one factor, however, a win by President Trump in the Nov 8 election is a big pro-market, anti-regulation, pro-carbon energy, pro-economy and pro US statement. Overall, he intends to make the US economically strong and enforce investment in American companies.

But not everyone is pro-US and restrictive policies and pro-China policies still represent a threat. And as the US debt payments become a crippling issue, the economy must be revived or the US will face credit downgrades. The massive stimulus spend that’s made inflation so painful, and business regulations that have strangled supply, could actually be key factors in driving the 2025 market boom.

Tom Lee of Fundstrat is even more optimistic about 2025 for the S&P.  He’s increased his forecast of corporate earnings next year to $2.75 from $2.60/share. In an interview on CNBC, he believes the S&P will grow 20% each year to 2030.

With industrial repatriation back from China, AI chip manufacturing, massive oil production, and perhaps lower taxes via Trump, it’s hard not to be giddy about the 2025 outlook for the economy and for equities. And for US equities, there is $6 Trillion in money markets still waiting to move over. Early 2025 seems the most likely moment as the forward progress of the economy becomes certain in investors minds.

Let’s explore further in this post why the 2025 stock market forecast is so positive.

Consider that the key stocks in the S&P and NASDAQ such as Apple, Nvidia, etc. will gain significantly as the economy heats up, and they’ll drag the markets up further too.

Major Stock Market Indexes last 12 months.
Major Stock Market Indexes last 12 months. Screenshot courtesy of Google Finance.

Some stock market experts believe the bull market bubble will keep inflation through 2025, while another believes the market could crash 30% in early 2025, while yet another believes the market will leap in summer next year.

I’m not sure what the opinions of trading company experts matters if they’re all over the place. Someone’s going to be very wrong!

Capital Economics believes the S&P 500 has 30% more upside and will hit 6500. Their forecast for the S&P end of this year is 5500, up 10% from current. Their forecast is for the prime lending rate will fall from 5.25% now to 3.00% in 2025.

US GDP Forecst 2025 through 2034.
US GDP Forecst 2025 through 2034. Screenshot courtesy of Goldman Sachs.

Lower Rates, Lower Taxes, Less Regulation, and the end of Globalism

Lower rates enable lending and cause the US dollar to fall, which makes US exports much cheaper. With protectionist trade barriers, companies are forced to purchase supplies in the US. With lower mortgage rates, the housing market should heat up considerably. Lower credit card rates further free up consumer’s budgets. Cars, appliances, furniture would all fall in price.

With more taxes coming in for the US government, less government jobs will be created, and there will be big job growth in the private sector. More housing will be built and illegal immigrants will blocked and sent back to their homes.

As money market rates fall, investors who own $6 Trillion in funds will want to move them into the equity markets which helps business move forward.

However, economists also believe the economy will only return back to its state in 2019 at about 1.8% GDP growth.

Global Economies Should Provide Some Tailwinds

The OECD is expecting continued growth in the global economy as all countries come out of the high interest rate era.

There are those who believe China will see its economy falter as the US adopts an xChina trade policy. While China production might fall, the country will still overproduce goods and easily supply the US, and at reduced prices. That helps to keep US prices down.

The AI-based economy is only growing and is expected to underpin the economic engine of the USA. That conversation is beyond the scope of this post, but Goldman Sachs Research forecasts AI will start having a measurable impact on US GDP in 2027.

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