2025 Global Markets Preview

12/30/24

Our 2025 Global Markets Preview is a brief overview on key markets going into the New Year.

The information below should be considered as a general guideline only, not as firm predictions. Our views are subject to change based on incoming data and chart trends.
That being said, here is our base case overview of expectations going into 2025:

1. We expect the S&P 500 index (SPX) to return 8-12% in 2025, to close in the 6440-6690 range.

2. (SPX) is due for at least a 10% pullback at some point in 2025.

3. We expect 10-year U.S. Treasury yields (TNX) in TNX 4.25-5.00% range if the U.S. economy avoids a recession.

4. We do not have a view on the possibility of a U.S. recession in 2025 or not.

5. The Fed Funds futures market is pricing one 25 basis point rate cut from the FOMC in 2025. We believe that this is a reasonable expectation.

6. Our top ranked sector going into 2025 remains the large-cap technology sector. Next on watch is consumer discretionary, communication services, financials and industrials.

7. Artificial Intelligence (AI) and AI data center buildout is still a major theme.

8. If 10-year U.S. Treasury yields (TNX) stay in the 4.25-5.00% range, we expect large cap tech and Nasdaq 100 (QQQ) to outperform vs small caps (IWM). If TNX trends below 4.00%, small caps (IWM) and Gold could perform well.

9. We remain long-term bullish on Bitcoin with a 2025 price target of 120-125K. That being said, this should be considered a speculative/high-volatility market with a possible technical back test range of 75K-80K.

10. We remain neutral on crude oil into 2025. China large caps are a high potential upside international idea, but this is not a focus market for us and this should not be considered as a core idea at this time.

1. We expect the S&P 500 index (SPX) to return 8-12% in 2025, to close in the 6440-6690 range.

The index is currently in an uptrend over the rising 10-month moving average and is making a series of higher highs and higher lows on the monthly chart.
Biggest risks to this outcome:
– If 10-year US Treasury yields breakout over 5.00.
– If the FOMC starts to raise interest rates again in 2025 or signals that they will.
– Any major earnings slowdown in S&P 500 companies.
– An economic recession in the U.S. (this is not our base view).

SPX returns were most frequently in the 0-10% range following periods where the index was up 40-50% over a two-year period.
Source: BofA Research, Bloomberg

Since 1872, the average S&P 500 return for Year 1 of the Presidental cycle is 5.0.%.
– There are many variables outlined below, but the most robust data is the “all-terms” data.
Source: BofA Research

2. (SPX) is due for at least a 10% pullback at some point in 2025.

The S&P 500 index averages a 10% correction every 320-330 trading days.
The last SPX correction over 10% occurred in Q4 2023.
There was a 9.7% correction for SPX in July/August 2024, from 5669.67 to 5119.26.
With that being said, a 10% pullback in SPX in 2025 would be inline with historical expectations.
We accept that index pullbacks are a part of the market process – we are more concerned with changes in the long-term trend.
Source: Carson Investment Research. Ned Davis Research

3. 10-year U.S. Treasury yields (TNX) in TNX 4.25-5.00% range if the U.S. economy avoids a recession.

TNX is testing 7-month highs currently, based on recent firm inflation readings and an FOMC more hawkish stance at their 12/18/24 press conference.
If the U.S. economy avoids a recession in 2025, we expect TNX to trade in the 4.25-5.00% range.
There is upside risk if TNX breaks out over 5.00%.
Higher Treasury yields are often a headwind for equities, so this market could impact SPX as well.

4. We do not have a view on the possibility of a U.S. recession in 2025 or not.

5. The Fed Funds futures market is pricing one 25 basis point rate cut from the FOMC in 2025. We believe that this is a reasonable expectation.
Source: CME FedWatch Tool CME FedWatch – CME Group

6. Our top ranked sector going into 2025 remains the large-cap technology sector.
Next on watch is consumer discretionary, communication services, financials and industrials.

We expect the highest and most consistent earnings growth to come from the technology sector in 2025.
Artificial Intelligence (AI) has been a key growth theme for us since May 2023 and we expect this to continue in 2025.
We view AI and the related data center buildout them as a long-term secular theme.
Like all sectors, the technology sector can experience higher volatility and pullbacks along the way, but it is our top ranked sector going into 2025.

7. Artificial Intelligence (AI) and AI data center buildout are still major potential growth themes.

Leading stocks in 2024 that support these themes are listed below. These should be considered as priority ideas going into 2025.
These stocks have had major runs of out-performance in 2024. If the market rotates away from these ideas, or if there is an extended drawdown on the S&P 500, these stocks could correct more than the general market.
Keep in mind, we use stop losses and active risk management on all long positions. If chart trends start to break down, we will often close a position and move it onto a watch list.

– Nvidia Corp. (NVDA)
– Palantir Technologies Inc. (PLTR)
– Tesla Inc. (TSLA)
– Broadcom Inc. (AVGO)
– Marvell Technology Inc. (MRVL)
– Taiwan Semiconductor Manufacturing ADR (TSM)
– Arista Networks Inc. (ANET)
– Vistra Corp. (VST)
– Vertiv Holdings Co. (VRT)

9. We remain bullish on Bitcoin with a 2025 price target of 120-125K. That being said, this should be considered a speculative/high volatility market, with a possible back test range of 75K-80K.

10. We remain neutral on crude oil into 2025. China large caps are a high potential upside international idea, but this is not a focus market for us, and this should not be considered as a core idea at this time.