Nagle's Notes: 01/03/2025 - Outlook for 2025

By Peter Nagle
Income Specialist
Thoughtful Income Advisory
505-423-5378
Email thoughtfulincome@gmail.com
 
Greetings and I hope you have enjoyed your holiday season. The Market, as measured by the S&P 500, is up over 20% for the year, even though the “Santa Claus Rally” kind of fizzled at year end. Still, it was a good year for investments, especially if you emphasized tech stocks in your portfolio. If you didn’t, your return was probably about half the market because the equal-weight index was up only about 11%. 
 
Looking forward to 2025, forecasts are, as usual, all over the lot. I subscribe to a number of analytical newsletters and there is never unanimity of opinion of where the Market is going to go. Nobody knows, I like to say: we’re not given that information. 
 
One market expert, Tom Lee of FS Insights, does make sense to me though. If you watch CNBC he’s on there fairly regularly. The SP 500 is currently at about 5900.  Tom thinks we’ll see it climb to 6500 by year end 2025, but experience a significant correction during the year. In other words, advance, decline, then advance again to end the year higher. 
 
Stock prices are pretty high by most measures. It seems likely to me we’ll see a good deal more volatility in markets this coming year: ups and downs. Earnings are also high though. So it’s entirely possible we’ll end up higher. So I think what Tom says makes sense. 
 
What could derail this? 3 things in my view:
 
1.) the Fed makes a mistake and doesn’t lower rates fast enough, and we have higher interest rates;
2.) Trump’s tariffs overshoot the mark and cause unintended severe economic damage;
​3.) the AI story, which has been driving Tech Stocks astronomically higher, loses traction and there’s a crash of Tech Stock prices. So those are the main risks, in my view. 
 
While this is all happening, areas of the Market other than Tech might have a good year. Take Healthcare for instance. The stocks in this index have taken a hit this year. But Company earnings are strong and projected to grow 15% in 2025. So they could be an undervalued area in an overvalued market as a whole. 
 
Best wishes for the new year! I provide financial advice to individuals in our Abiquiu community at no charge as a way of giving back. If you have questions in that area feel free to contact me. I’ll do the best I can to help you sort through the issues. 
 
Peter J Nagle, M.A.R.
Thoughtfulincome@gmail.com