The stock market’s record-breaking rally showed no signs of slowing down last November, but investors may want to temper their expectations for 2025. The Dow Jones Industrial Average and S&P 500 reached new highs in the month, with gains of 7.5% and 5.7%, respectively. However, Deutsche Bank macro strategist Henry Allen warns that the market won’t be able to benefit from low expectations next year.
Allen predicts a 2.1% economic growth rate for the US in 2025, up from a 1.2% expectation heading into the year. He notes that repeated surprises on the upside have raised expectations, making it harder to achieve similar gains in the future. Additionally, with valuations already elevated across several asset classes, further gains are likely limited.
History also suggests that sustained growth for three consecutive years is unlikely. The S&P 500 has only managed a third consecutive gain twice before, both times during the dot-com bubble in the late 1990s. As such, Allen warns that investors should be cautious and adjust their expectations for 2025.
Source: https://www.cnbc.com/2024/12/02/why-market-gains-in-2025-could-be-a-lot-tougher-than-the-last-two-years.html