5 Predictions for 2025
Bold yet imprecise.
This time last year I introduced my 5 predictions for 2024 and only one proved to be inaccurate. That was my prediction that not much would change in Washington. Whoops. Good thing we had Polymarket as a counterbalance.
I nailed three predictions: no recession, a Bitcoin ETF with mainstream appeal, and the continuation of elevated interest rates. My prediction that AI concerns would reach a “fever pitch” did not occur with the intensity I imagined, but it did occur so I’m counting it as a W.
But who cares about the past year when we have 2025 locked and loaded? Let’s top off the plutonium tank on the DeLorean and punch the accelerator with reckless abandonment.
Here are my 5 predictions for 2025:
1. Government spending does not decrease
If you read my newsletter Doubting the DOGE then you already know my thesis. Policy makers are incentivized to spend profligately. It’s much easier to obfuscate excessive spending with inflation than to face a binary choice between spending cuts and tax increases. While it may be vouge to espouse austerity publicly, each vote to cut the flow of easy money is made internally by humans plagued with conflicts of interest.
2. The AI human counter-revolution begins
Common public perception of AI is generally positive as most see it as a benign triviality, or an enhancement to their technological toolbox. A few big thinkers wise in the ways of techno-augury share a more sobering message: your job will be obsolete. People dependent on these jobs will not go quietly into the night, and they will garner public sympathy. Faulty code shouldn’t be the only concern for would-be corporate adopters, but also public outrage.
3. Crypto assets suffer a bear market
The rally in digital assets has been breathtaking with the global cryptocurrency market totaling $3.44T as of 12/26/2024. The majority of this is concentrated in the top ten projects with Bitcoin representing 54% of the market. So, a call for a bear market in crypto is essentially a call for a bear market in Bitcoin. The asset class has a nasty habit of subjecting investors to face-ripping selloffs shortly after creeping to new all-time-highs, so this prognostication doesn’t take a stretch of the imagination.
4. The Fed raises rates
To be fair, neither Jerome Powell nor the futures market know what the Fed will do with rates in 2025 so you can bet on this prediction with the amount you paid for it. Since September, the Fed has lowered its federal funds rate by a total of 1% in three separate meetings. In response, long-term bond yields rose across the board with the 10-year Treasury moving up to 4.58% from sub-4%. Clearly, the bond market sees potential for a resurgence in inflation, and I’m inclined to agree.
5. U.S. equities correct before moving higher
As of this writing, the S&P 500 has rallied 28.31% in 2024. This comes on top of a 24.23% total return in 2023. The energy fueling this appreciation came from both earnings growth and multiple expansion, pushing large cap stocks into valuation-rich levels not seen since the dotcom era. One thing I’ve learned in my years in this business is that stock market volatility cuts both ways with impetuous movement. There’s only so high the hand can go before it comes back to center-mass. Then the march higher can resume.
Absent massive cuts in government spending, the dreaded phase of the economic cycle only appears as a specter over a directionless horizon. 2025 should be another year of economic expansion punctuated with trade, technological and market disruption. Another exciting year to be an American! -
Yours truly will be here to document and comment on current events as they occur. Thank you for reading and Happy New Year!
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