Dear Clients,
As we step into 2025, I’d like to share some reflections, offer predictions, and help prepare you for the road ahead. This year promises both opportunities and challenges, and our goal at Kessler Investment Group, LLC (“KIG”) is to guide you through it with thoughtful and pragmatic strategies.
Looking Back: Lessons from 2024
At the start of 2024, many of Wall Street’s top firms issued their forecasts for the S&P 500 Index:
- Goldman Sachs: 5,600
- Oppenheimer Asset Management: 5,200
- Bank of America: 5,000
- Barclays: 4,800
- Morgan Stanley: 4,500
- J.P. Morgan: 4,200
The S&P 500 began the year at 4,745 and closed at 5,881, delivering a stellar return that far exceeded even the most optimistic predictions. Interestingly, half of these firms had anticipated flat or negative performance. This serves as a reminder: markets often defy expectations.
What the Experts Are Predicting for 2025
This year, there’s a rare consensus among major investment firms, with most forecasting a roughly 10% gain for the S&P 500:
- Goldman Sachs, Morgan Stanley, J.P. Morgan: 6,500
- Bank of America: 6,666
- UBS: 6,400
This aligns with the historical average return of the stock market over the past century. However, when Wall Street expects “average,” history tells us to prepare for the unexpected.
Our View: A Positive Year with Potential Volatility
At KIG, we are optimistic about 2025. Here’s why:
- Earnings Growth: Corporate profits are set to accelerate, driven by economic resilience and sectoral strength.
- Deregulation: Policies from the new administration may offset inflationary pressures from tariffs.
- Productivity Gains: Innovations in Artificial Intelligence (AI) and continued efficiency improvements from work-from-home practices will likely boost economic performance.
We forecast the S&P 500 could reach 6,800, translating into a potential 15% gain for the year. However, markets rarely rise in a straight line. A correction of up to 15% could occur before rallying toward year-end highs. Such volatility may present buying opportunities, which we plan to capitalize on.
Factors to Watch
While our outlook is positive, several factors could shape the market:
- Optimism: There’s a lot of it right now, perhaps too much. Excessive optimism can lead to disappointment if expectations aren’t met. In contrast, at the start of 2024, many experts were cautious, setting the stage for surprising gains.
- Federal Reserve Policy: If inflation holds steady, we might see one more interest rate cut, which would benefit the market. However, if unemployment rises sharply, the Fed could cut rates aggressively, introducing more volatility.
- Tariffs: Much has been said about the potential inflationary impact of tariffs. While new tariffs may emerge under the incoming administration, most of the existing ones—implemented during President Trump’s first term and maintained by the Biden administration—are already baked into the economy. This suggests any new tariffs will have a more incremental impact.
The Big Picture
We believe the current bull market, driven by transformative AI advancements, is still in its middle stages. Much like the Internet boom that fueled the 1982–2000 bull market, AI is set to redefine industries and create new growth opportunities. By our estimation, this secular bull market has another five to seven years to run.
Staying the Course
While volatility may increase in 2025, it’s important to remember that short-term fluctuations don’t define long-term success. At KIG, we remain committed to adapting our strategies as conditions evolve, keeping a clear focus on your financial goals.
As always, we are here to answer your questions, discuss your portfolio, and ensure you feel confident about the path forward. Thank you for placing your trust in us.
Here’s to a successful and prosperous 2025!
Warm regards,
Kessler Investment Group, LLC
All information in this presentation is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. All economic performance data is historical and not indicative of future results. The market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. Certain statements contained within are forward looking statements including, but not limited to, statements that are predictions of or indicate future events, trends, plans or objectives. Undue reliance should not be placed on such statements because, by their nature, they are subject to known and unknown risks and uncertainties. Please consult your adviser for further information.
Opinions shared in this presentation are not intended to provide specific advice and should not be construed as recommendations for any individual. Please remember that investment decisions should be based on an individual’s goals, time horizon, and tolerance for risk.