2025: My Only Worry is that I have no Worries
As we close 2024 and are halfway to 2030, I have no worries about next year. My only worry about 2025 is that I have no worries.
Bird Flu
There has never been an H5 pandemic. Bird flu will not become a pandemic next year.
Inflation
So what if inflation is 2.5-3% next year? Inflation has been difficult to get to normal levels in the last decade or two. The big fear is deflation, not a low level of expected inflation.
Stock Market Returns
We have had back-to-back returns above 20% for the US stock market.
Yet this is supported by earnings, and future expected earnings show a broadening albeit still US stock market. Another 20% year is very possible and wouldn’t even get us to bubble territory (yet).
Geopolitics
I’m not smart enough or stupid enough to predict next year based on geopolitics. I expect it will have a similar effect as in 2024—volatility but nothing much else.
Interest Rates and Monetary Policy
The Fed cut a full point, yet 10-year treasuries and mortgage rates are higher in 2024. That was not on anyone’s bingo card at the start of 2024.
The baseline is for two more cuts next year, stable higher inflation, and a tight labor market.
And no one can say anything intelligent about tariffs, deportation, or any other threatened position. If you don’t care about market volatility, there will still be winners and losers just as always.
Recession Risks
After two years of recession risk calls by economists, no one sees the economy cooling off next year. Europe is a museum, Japan is an old age home, and the US threw down a 3% GDP in the back half of 2024. After a year of inverted yield curve false positives and Sahm Rule blowups (she admitted it was likely a false positive to her credit), we are ready to have another year of strong economic growth. Since the president-elect views strong stock prices as a personal goal, the bubble has a few more years to grow.
US DEBT
We owe $36T, and our debt to GDP ratio is currently down from 130% in March 2021 to 120%. We owe a lot of money, and the interest rate on the debt is not insignificant.
Yet the Dollar is still a global wrecking ball, defying all expectations. This means more travel and giving DOGE six months to see what they can do about spending. This is a new world we are in. Americans can keep spending and driving the economy, and maybe we can have lower taxes because the government spends less money. It is at least worth a try.
Energy Prices
The US became energy independent in 2019, with record energy exports in 2023. What will fewer regulations and a drill-baby-drill mentality have on energy prices? This is deflationary as energy affects everything’s prices.
Commodity Prices
China will not return anytime soon to be a production superpower. Many countries want to grow their middle classes, and we will import deflation from jobs worldwide.
Back home, America has plenty of commodities in its rocks and mountains that we cannot access because of regulations. We are already energy-independent, and we can mine just about everything else we need if we do not risk the environment around these projects.
My Only Worry is that I have no Worries
My only worry about 2025 is that I have no worries. The world could go to hell, and a black swan always possible. Otherwise, the world blew up in 2024, and the stock market and economy are strong.
I expect 2025 to be great despite all sorts of weirdness and chaos and the stock market to increase more than 20%. Historically, that is the most likely rhyme, despite higher for longer interest rates, record net worths, and strong domestic economic growth. I’m not Pollyanna, but I have nothing to worry about in 2025.