Tuesday, December 24, 2024

2025 US Stock Market Outlook │ Larry Williams

My outlook on the US stock market in 2025 uses the metaphor 'Clint Eastwood Market,' representing a mix of good, bad, and ugly factors:
  • On the positive side, there are no immediate signs of a US recession, with strong employment figures and a labor market expected to improve in early 2025. Business conditions remain stable, and historically, stock markets tend to perform well in the first year of a presidential term. The probability of a recession is currently low, and certain companies may experience positive performance next year. 
  • However, there are risks, including potential profit-taking after a strong 2024 market, the uncertainty surrounding trade policies and tariffs, and the unpredictable actions of the Federal Reserve, Congress, and business leaders like Elon Musk. 
  • On the negative side, market valuations, such as high price-to-earnings and Shiller CAPE ratios, suggest that the market is overvalued, which increases the risk of a correction. Additionally, industrial production is underperforming, which could hinder economic growth, and inflationary pressures from the money supply expansion during the COVID-19 pandemic may contribute to market volatility.
Given the current very high valuation ratios, the 2025 forecast indicates slower growth and market underperformance compared to historical averages. Therefore I don’t foresee a runaway bull market in US stock indices in 2025, and volatility is likely to be a key characteristic, with short-term rallies and corrections. Very long-term market cycles suggest we are at the beginning of a prolonged period of sideways movement, with the next major bull market not expected to begin until around 2038. 
 
Very Long Term Market Wave in the DJIA down into 2038.
 
 Shorter Long Term View on the DJIA with lows in 2025 and 2028.
 
General Road Map for 2025.

However, regarding a looming major crash that some are constantly talking about, I don't see it occurring in 2025 either. While the market will be challenging, the overall bias will lean toward the upside.


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