2025 is here and it brings all new expectations for how the stock market will perform. 2024 was a good year for the market with the S&P 500 (SPX) up 24.01% and the Dow Jones (DJIA) up 12.8%. That’s despite ongoing inflation and high interest rates weighing on the market. A large part of that comes from strong consumer demand even with increased prices.
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Economists expect 2025 to be another good year for the stock market. However, they warn that it might not be as strong as 2024. One of the factors affecting the stock market this year is interest rate cuts. The Federal Reserve is slowly working to reduce interest rates back down to 2%. The only issue is inflation not cooling as fast as the central bank hoped.
This still resulted in the Fed cutting interest rates at its December meeting. Even so, it warned that interest rate cuts may slow in 2025 to adjust for resilient inflation. That means these rates will continue to weigh on stocks, especially those in the growth and tech categories.
Stock Market 2025 Predictions
Fidelity Investments director of global macroeconomics Jurrien Timmer is “bullish on stocks for 2025.” His positive stance comes with a slight warning that he doesn’t believe “investors should expect quite such spectacular returns next year as we have seen this past year,” due to high valuations and the maturing bull market.
JPMorgan and Morgan Stanley analysts also predict stock market gains in 2025. The former estimates a roughly 10% increase for the S&P 500 while the latter predicts the SPX could rise as much as 25% this year.
What Stocks Should Traders Consider in 2025?
Artificial intelligence (AI) stocks continue to be a hot topic heading into the new year. That means investors will want to track them throughout 2025 and should at least mull over taking a stake in the sector. Some of the biggest AI stocks to consider include Nvidia (NVDA), Microsoft (MSFT), and Broadcom (AVGO), but there are plenty of other options to choose from.
