At one minute before midnight on December 31, the Watford Crystal Times Square New Year’s Eve Ball will begin its slow descent to mark the year 2025.
When the 11,875-pound (5,386-kilogram) ball hits the ground, we say goodbye to the old year, with the champagne flowing, fireworks going off and people around the world making their own decisions.
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The S&P 500 is starting the new year on a high note.
The index, which tracks the stock performance of the 500 largest companies listed on U.S. stock exchanges, is up 26.7% so far this year and is up 24.2% in 2023.
The S&P 500 hit more than 50 all-time highs in 2024, the first of which occurred on January 19.
U.S. Bancorp Asset Management said that after Donald Trump was elected president for a second time in November last year, investors have become increasingly concerned about the policies of the second Trump administration and their potential market impact.
During the campaign, Trump pushed for several key initiatives, including extending tax cuts in the 2017 Tax Cuts and Jobs Act, tougher immigration policies and the potential for new tariffs on imported goods.
Analysts point to risks for S&P 500 in 2025
The investment advisory group said the market will pay close attention to its subsequent impact on economic growth and inflation.
“We are still waiting for clear results on whether policies from the new administration and Congress will lead to inflation,” said Eric Friedman, chief investment officer at U.S. Bancorp Asset Management.
Related: Inflation report adds complexity to rate cut bets
“Since we don’t have the full details yet, we tend to be mindful of the short-term opportunities presented by market disruptions, but we don’t want to jump to conclusions without sufficient evidence,” it added.
Goldman Sachs Research expects the S&P 500 to rise for a third consecutive year amid solid economic expansion and steady earnings growth.
Goldman Sachs chief U.S. equity strategist David Kostin wrote last month that he expects the index to rise to 6,500 by the end of 2025, up 9% from current levels and a total return including dividends of 10 %.
The investment firm said valuations are high by historical standards and could create risks for investors. Over the past two years, the S&P 500’s price-to-earnings ratio has increased 25%.
“Equity markets are already priced in on an optimistic macro backdrop and valuations are high, which creates risks into 2025,” Costin said.
High price-to-earnings ratios are a weak signal of near-term returns and often exacerbate market declines during negative shocks.
According to the benchmark macroeconomic outlook researched by Goldman Sachs, the economy and profits will continue to grow in the coming years, and bond yields will remain near current levels.
But the company said there are risks as it enters 2025, including the threat of sweeping tariffs and the possibility of higher bond yields.
On the other hand, a friendlier fiscal policy from the Fed or a more dovish policy mix could lead to higher returns, Goldman Sachs said.
Fund manager reveals his list of big surprises
TheStreet Pro’s Doug Kass dusts off the crystal ball and lists 15 big surprises for 2025.
This is the famed hedge fund manager’s 23rd year compiling the astonishing index. Kass paid tribute to singer Bonnie Raitt in hopes of giving people something to talk about.
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“My surprise list has grown from 10 surprises in 2024 to 15 surprises in 2025…well, because it’s been a surprising year with tons of unexpected political, social, regulatory, economic and market surprises. ! he wrote on December 23.
The list covers politics, sports, artificial intelligence, Tesla and other fields (Tesla) CEO Elon Musk and climate change, which Cass believes will hit the United States in the form of once-in-500-year rains and floods.
He said the disaster would cause $250 billion to $500 billion in losses, about 10 times worse than the damage caused by Hurricane Katrina in 2005, and would catch the property casualty insurance industry off guard.
He predicted that one of the top 10 property damage companies will receive a U.S. government bailout due to insufficient reserves and the need to take action to prevent financial contagion.
Kass also had some thoughts on the S&P 500, and they were a bit pessimistic.
He said the S&P will fall about 15%, while the tech-heavy Nasdaq will fall more than 20%.
However, Kass also said that the S&P 500 equal-weighted EFT (RSP) stocks equally weighted in the benchmark would fall 5%.
“Financial and technology stocks were among the biggest losers, weighed down by disappointing artificial intelligence, rising interest rates, rising inflation and slowing economic growth,” he said. “The index closed at Lows of the year.”
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