On Dec. 31 at one minute before midnight, the Waterford Crystal Times Square New Year’s Eve Ball will begin its slow descent to mark 2025.
When the 11,875-pound (5,386 kg) ball touches down, we will bid adieu to the old year, while the champagne flows, fireworks explode and people the world over make their resolutions.
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The S&P 500 will begin the new year on a high note.
The index, which tracks the stock performance of 500 of the largest companies listed on U.S. stock exchanges, has climbed 26.7% so far this year, compared with 2023’s 24.2% rally.
The S&P 500 has hit over 50 record highs in 2024, with the first one happening on Jan. 19.
In November Donald Trump was elected president for the second time, and investors are increasingly focused on what’s to come from the second Trump administration’s policies and their potential market impact, U.S. Bank Asset Management said.
During the campaign, Trump promoted several key initiatives, including extending tax cuts that were part of 2017’s Tax Cut and Jobs Act, stricter immigration policies and potential new tariffs on imported goods.
Analysts cite risks for the S&P 500 in 2025
Markets will closely monitor the subsequent impact on economic growth and inflation, the investment advisory group said.
“We are still waiting for clarity on whether the new administration’s and Congress’s policies prove to be inflationary,” Eric Freedman, chief investment officer with U.S. Bank Asset Management, said.
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“Because we don’t yet have full details, our preference is to be mindful of short-term opportunities provided by market dislocations, but we don’t want to draw conclusions without sufficient evidence,” added.
The S&P 500 is forecast to post its third straight year of gains amid solid economic expansion and steady earnings growth, according to Goldman Sachs Research.
David Kostin, chief U.S. equity strategist at Goldman Sachs, wrote last month that the index was projected to rise to 6,500 by the end of 2025, a 9% gain from its current level and a 10% total return including dividends.
The investment firm said that valuations were high by historical standards and might pose a risk for investors. The price-to-earnings multiple of the S&P 500 index has increased 25% during the past two years.
“An equity market that is already pricing an optimistic macro backdrop and carrying high valuations creates risks heading into 2025,” Kostin said.
High multiples are weak signals for near-term returns and typically increase the magnitude of market downturns when there’s a negative shock.
The economy and earnings will continue to grow and bond yields will remain around current levels in the coming years, according to Goldman Sachs Research’s baseline macroeconomic outlook.
But several risks appear as we head into 2025, the firm said, including the threat of an across-the-board tariff and the potential of higher bond yields.
At the other end of the spectrum, a friendlier mix of fiscal policy or more dovish policy from the Federal Reserve could result in higher returns, Goldman said.
Fund manager announces his list of big surprises
TheStreet Pro’s Doug Kass has dusted off his crystal ball to put together a list of 15 big surprises for 2025.
Kass is a longtime hedge fund manager whose career stretches back to the 1970s at Putnam, and includes a stint as director of research at the billionaire Leon Cooperman’s Omega Advisors.
This is the renowned hedge fund manager’s 23rd year of compiling an index of shockers-to-come. And with a nod to singer Bonnie Raitt, Kass wants to give people something to talk about.
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“My Surprise List goes to 15 Surprises in 2025, from 10 Surprises in 2024 … well, because it’s such a surprising year with a vast array of unexpected political, social, regulatory, economic and market surprises on tap!” he wrote on Dec. 23.
The list covers such diverse areas as politics, sports, artificial intelligence, Tesla (TSLA) CEO Elon Musk, and climate change, which Kass sees striking the U.S. in the form of a 500-year rain and flooding event.
He said that this disaster would result in $250 billion to $500 billion of damage, roughly 10 times worse than what Hurricane Katrina caused in 2005, and would catch the property-casualty insurance industry flatfooted.
With insufficient reserves and requiring a move to forestall financial contagion, one of the top-10 property-casualty companies will be bailed out by the U.S. government, he predicted.
Kass also had something to say about the S&P 500, and it’s kind of on the gloomy side.
He says the S&P Index would fall about 15%, while the tech-heavy Nasdaq will drop more than 20%.
Kass also said, however, that the S&P 500 Equal Weight EFT (RSP) , which equally weights stocks in the benchmark, will decline 5%.
“Under the weight of AI disappointment, higher interest rates, rising inflation and lower economic growth — financial and technology stocks are among the largest losers,” he said. “The indexes close at their yearly low on the last day of 2025.”
Related: Veteran fund manager delivers alarming S&P 500 forecast
