Major fund manager reveals stock market forecast for 2025 todayheadline

So, the new year has begun and the markets are a bit choppy. Not bad choppiness but maybe the kind that made an investor ensure that she knew where she’d hid her bottle of antacids. 

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The major averages were lower in the week that began Dec. 30, 2024, and ended Jan. 3, 2025. 

They were down again the next week, the first full week of the year. The Standard & Poor’s 500 Index dropped 1.94%. The Dow Jones Industrial Average dropped 1.86%, and the Nasdaq Composite slumped 2.34%

Related: Analyst who correctly predicted 2024 gasoline prices unveils 2025 forecast

Monday and Tuesday were odd. The S&P 500 and Nasdaq were not strutting much. The Dow actually advanced nearly 600 points in two days.

And then came Wednesday and the surprisingly benign Consumer Price Index report for December. 

Talk about relief! All three major averages, negative for the year after eight days of trading, exploded as investors and/or their preset computers started to buy. The Dow jumped 703 points, or 1.7%. The S&P 500 ended 1.8% higher. The tech-heavy Nasdaq jumped nearly 2.5%. 

Maybe Jerome Powell and the Federal Reserve can cut interest rates two or three times this year.

A harsh market start and then a jump. Now what?

And suddenly all three averages are now positive for the year. And life looks good again after the unease of the past few weeks.

So now what? In the next few weeks, bearish and semi-confident analysts will posit that U.S. markets will be sharply volatile over the next few weeks, or maybe longer. That’s as the Trump administration comes in, imposes major tariffs and orders big deportations of undocumented workers and then tries to undo everything the Biden administration did. 

Related: Fed members reset interest rate cut forecasts for 2025

Besides, stocks just finished two really good years, and third years after two really good years are weak, these skeptical analysts say. 

Actually, the third year after two years of big gains is actually pretty good. It’s happened eight times since 1950, according to Carson Group’s 2025 Outlook. Only twice has the S&P 500 fallen back the third year: in 1977 and in 2000 — the year the dot.com bubble burst.

Why a key money manager is bullish on the U.S.

Carson, an Omaha money manager with about $50 billion in assets under management, is, in fact, mostly cheery about 2025. 

Let’s start with five positive forces it sees at work in the economy: 

• The economy is growing faster than prepandemic projections the Congressional Budget Office made. Looser regulations expected from the Trump administration will help.
• Productivity is growing 2.6% a year, more than the 1.6% rate seen between 2005 and 2019.
• Income growth is strong and likely to stay that way.
• Most households are in decent financial shape thanks to higher home values and stock gains, either through direct investing or through retirement plans.
• Headline inflation will remain muted, fairly close to the Federal Reserve’s 2% target. 

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Carson’s outlook concedes there are threats to the firm’s bullish scenario: 

The rising dollar. It’s up 8% since the end of September and 14.5% since early 2022. A rising dollar makes U.S. exports more expensive for foreign customers. It makes U.S. companies’ foreign profits less valuable. And it makes imports into the U.S. cheaper.

Higher interest rates. Home sales and an expected surge of mergers and acquisitions need decently priced financing. The Fed needs to concentrate on pushing rates lower, the outlook says. 

Housing weakness. Not enough houses are getting built and much of the housing market is stagnant because of high prices and high mortgage rates — 7.2% on a 30-year mortgage as of Wednesday, according to Mortgage News Daily. 

New-home completions, the Carson report notes, are running 25% above housing starts, a signal many builders aren’t confident of the outlook and want to finish existing projects before signing up for more. (But builder KB Home  (KBH)  reported better than-expected quarterly results this week. So, perhaps buyers are finding a way to deal with current mortgage rates.)

Analyst announces bullish view on stocks

Yes, some rockiness will hit markets in the first half, but the second half will be strong.

Carson sees stocks rising 12% to 15% on the year, with bond prices rising 4% to 7% as the Federal Reserve continues to trim interest rates.

Here’s how the firm looks at various investment categories.

U.S. vs. international stocks. Carson is overweight U.S. stocks. Europe and China have too many problems.

Related: Fed official offers candid words on inflation, interest rate cuts in 2025

Large capitalization stocks vs. all the rest: Carson is neutral on large caps. But it’s bullish on midcap and small-cap stocks because it’s time for them to shine. 

Positivity on some other sectors: The firm follows these two sectors with a positive view of financial and industrials. And Carson sees gains broadening out in 2025: Financials, utilities and communication services should join tech with 20%-plus gains. 

Growth vs. value stocks. Carson is underweight the big visible growth stocks. (Think Nvidia  (NVDA) , Apple  (AAPL)  or Tesla  (TSLA) .) Carson thinks many big growth stocks are too pricey.

Defensive vs. cyclicals: Defensive stocks in what could be a volatile year are a good bet. 

Fixed income: Not overly excited except Treasury bills if prices fall. 

Related: Veteran fund manager issues dire S&P 500 warning for 2025