In 2025, the S&P
500 is expected to head toward a multi-year major market top. The
overall structure of the S&P 500 is forecasted to rise until
mid-January, followed by a correction of more than 10% into late
February or mid-to-late March, and then a melt-up into a major top in
mid-July or late-August. This will be followed by an approximately 17%
drop into late October that will trigger a bear market.
S&P 500 projection for 2025 (timing, not magnitude) with seasonally strong windows in the bottom panel.
The S&P 500
is projected to rise until around January 17, reaching approximately
6,250, then experience a 10%+ correction by the end of Q1, targeting
around 5,600. Key buy points are expected around February 26 and in the
second half of March, with the ideal date being March 28, which will set
up the final leg up. A minor buy point is likely around June 27.
The
major top is anticipated around July 17, with the possibility of a
lower high or a double top/divergent high by August 22, with a minimum
target of 6,500 and an upside target of approximately 7,000. After this,
the market is expected to drop into a low around October 27, aligning
with seasonal and nested cycle lows, followed by a bounce that
ultimately fails. The S&P 500 is expected to end the year in the red, setting up for a challenging 2026, with a year-end target of 5,650.
In 2025 we face a conflict between the Decennial Cycle (years ending in "5"),
which is typically the best year, and other cycles that suggest the
market will peak in 2025. I will provide commentary on each cycle,
starting with the 3.5-Year Kitchin Cycle (41-Month Cycle).
1.) The current Kitchin Cycle
began in October 2022 (when we accurately called the bear market low),
and 2025 will be year 3, which usually marks the peak. After that, the
market is expected to decline into late 2026, which aligns with the
ideal low of the next 3.5-year cycle.
2025 will be year 3 of the 3.5-year Kitchin cycle.
3.)
The longer 18.6-Year Cycle is entering its peaking window in 2025, or
possibly 2026. We are entering year 17 of the cycle, so we should begin
watching for signs of a top, such as a marquee event like the SpaceX
IPO. Market tops are a process, but we should start looking for
indicators like weakening economic data, deteriorating market breadth,
and earnings rolling over.
The 18.6-Year Cycle is peaking in 2025, or possibly 2026.
4.) The Decennial Cycle
shows that years ending in "5" are typically the most bullish in the
10-Year Cycle and rarely have negative returns. However, I believe we
may have pulled some of the gains from 2025 into 2024 (since year 4
usually experiences sideways consolidation, setting up a blow-off top in
2025). Given the strength of the Decennial Cycle, we must be mindful
that the fall of 2025 could be stronger than I currently anticipate. The
average seasonality for year 5 is shown in the second chart.
Years ending in "5" are typically the most bullish in the 10-Year Cycle.
A close-up of the typical Year 5 seasonality.
5.) I
analyzed the years within the 4-year cycle pattern and identified the
11 most similar years, based on a high correlation score and comparable
structure. From this analysis, I created a composite historical
projection, shown in green.
I’ve also included the composite 4-year cycle for reference, and you
can see that the best-matching years closely follow the typical 4-year
path.
The green composite line represents a historical projection based on
the 11 most similar years within the 4-year cycle pattern.
6.)
The 5-Year Liquidity Cycle, proxied by the M2 year-over-year (YoY)
change, is expected to peak in the second half of 2025 and then decline
until late 2028 or early 2029. The Reverse Repurchase Agreement (RRP) is
nearly drained, and while the Treasury General Account (TGA) could
provide a temporary boost if it’s spent down, the Fed will soon halt
Quantitative Tightening (QT). However, other central banks can't ease
much due to the strong U.S. dollar. Maintaining historically overvalued
equities will require a significant liquidity injection.
Maintaining historically overvalued equities will require a significant liquidity injection.
The
ideal bottom of the 5.3-year inflation cycle falls around the end of
2025. It largely depends on oil, which should begin its multi-quarter
run sometime in 2025:
The bottom of the ideal 5.3-year inflation cycle falls around the end of 2025.
7.) On the macro front, GDP
growth is expected to peak in mid to late 2025, with rising unemployment
signaling a recession in early 2026 or late 2025. The 5-year liquidity
cycle is expected to peak around mid-2025 and roll over, which will
create challenges for overpriced equities and crypto. The Fed’s actions
regarding liquidity will be crucial, particularly if it continues
supporting asset prices without real economic justification.
GDP peaking phase around mid to late 2025.
■ Bitcoin
will experience a deep retest into a March 2025 low, followed by one
more run at the 2024 highs in early summer, after which crypto will
enter a multi-year bear market. In my opinion,
there is a high probability that the next 4-year cycle (2026+) will be
left-translated, with Saylor and MicroStrategy (MSTR) being liquidated
and the Tether-fraud (USDT) likely exposed. Meanwhile,
almost all altcoins will lose 99-100%. It is currently unclear whether
Bitcoin will act more as a NASDAQ proxy or a monetary hedge in the years
ahead. Many altcoins may have already peaked for the cycle, but some,
like Ethereum (ETH), still have more upside.
■ The Dollar
is likely to remain in an uptrend into 2025-26. There is a potential
pullback early in the year, helping risk assets push higher, followed by
a rally into spring (and a subsequent sell-off in risk assets). Then, a
big correction in the USD is expected into the July-August low, which
should coincide with the stock market top.
■ In the Euro,
an 18-month cycle low is due and will likely occur around March 2025.
The subsequent 18-month cycle is likely to be left-translated, with a
drop into the 2026 four-year cycle low, targeting below parity with the
dollar.
EUR going to crash into 2026 low.
■ The Yen is expected to begin a multi-year uptrend, leading to trillions in capital flowing back to Japan in the years ahead.
» ¥ strength leading to repatriation or repatriation leading to strong ¥? «
■ Bonds
remain in a secular bear market, so any rally in bonds will be cyclical
(driven by a growth scare or recession), followed by a significant
rally in rates. A potential counter-rally in bonds is expected in Q1
2025, but it is likely to fail. The technical target for TNX is 5.5%.
■ Given that 2022 was the 8-year cycle low in Gold,
we now have a bullish intermediate and long-term bias. There is a
potential low in the spring around the 2,400 support, followed by a push
higher towards 2,800–3,000+ into 2026. Central banks won’t stop buying
as the war cycle and geopolitical tensions intensify, while governments
debase currencies.
Gold upward bias from Q2 2025 onwards.
■ Silver is expected to reach 38.00 within the next 6 quarters.
■ All energy should be in an uptrend over the next 6-8 quarters, with Natural Gas likely leading (reaching a new all-time high in 2026).
The next best entry opportunity in Natural Gas is likely to occur
at the end of January to early February 2025, with a confluence of
the 100-day cycle low and the seasonal low. The above is composite
cycle chart from December 3, 2024 for reference.
The 3.5-YearCrude Oil cycle (left chart) is starting with long consolidation.
Leading indicators (second chart) pointing to expansion move due in 2025-26.
Crude Oil is expected to reach the 80 in the spring of 2025, then 100, and 150 by 2026.
» Energy will outperform after big tech tops. «
My Crude Oil leading indicators and cycles suggest a big move in the
next 2 years, but the exact timing of the expansion is hard to pinpoint,
potentially around the end of 2025 into 2026. [see also HERE]. Uranium is likely to return to 100+ in 2025, and Coal should also see gains.
.PNG)
%20Seasonality%20(2000-2025).png)
