A Look Back at 2025’s Stock Market Predictions

Welcome to "The Informed Investor," where we break down the latest financial headlines, bringing in research and insights to help you separate the news from the noise. Welcome, everybody, to "The Informed Investor," a show brought to you by Dimensional Fund Advisors, a global asset manager bringing financial science to investing. And today's topic is 2025 headlines, where we are going to take a look at what we were reading at the beginning of 2025 and see how those predictions sort of panned out throughout the year. I'm Mark Gochnour, I'm joined today by Jake DeKinder and the doctor, Wes Crill. All right guys, this will be a fun one. I think we're a little bit wound up for this one. I can predict the way those predictions turned out, for most of them. Well, well, let's see how it goes here. I'm gonna start with my all-time favorite. It's admittedly about two years old, but it's one of my favorites here, so I'll just read it and I'll get your guys' thoughts on this one. Okay, "The future is bright if you know where to look." I mean, it's a- Comments? It's hard to argue with that. It's a true statement, "If you know where to look." Right? Do you know where to look though? If it was that easy. If it was that easy. I don't know where to look. All right, let's start with the ones that we get asked about probably more often than not in the last 12 months or so. First one I'm gonna start with is gold. All right, here is a prediction about gold as we started out 2025, "How gold prices can surge past 3,000, even if the dollar rises." All right, well, they got that one right. Nailed it. It more than surge, I mean, it just took off and I think today it's still well over 4,000. Mm-hm. Right? So any quick reactions to that one? Jake, I'm looking at you. Start with you first. It's almost like the law of large numbers, you know, if enough people make predictions, some of 'em are gonna be right. That's about all I have to say about that one. I mean, this is the nature of speculation, like, you're trying to make a prediction about where these prices are gonna go. And in the case of gold, there's not really an expected return proposition there. There's no reason why gold should have a positive expected return. So if you're coming out of a period where it did really well, a lot of investors might expect that to continue. Being right is being lucky there. I love these certainty that it had, you know, had a call on gold, but then it doesn't matter what the dollar's gonna do, it's going up. And again, they got it right. And we did an episode on gold. So, you know, we'll remind viewers go back in the past there and watch the one on gold. And I liked what you said there, there's no expected return there. So really the hope is somebody will pay a higher price than what it is at today. Well, the other thing that's nice about that is they say sort of gold and then US dollar. And I think you find that a lot where people are sort of saying that like, this is the reason that something happened. But we know there's so many different things that affect stock prices. So many different things affect any asset price that's out there, and people love to sort of simplify down to here's the one thing that might drive it. Yeah, all right, topic number two here. What's the other one were we've gotten tons of questions on this year. I wish we could do a live audience poll here. I know the answer. What is it? Bitcoin. Bitcoin. Absolutely right. Never would've guessed. Here's the headline. "Bitcoin smashed records this year: why the crypto's price could double again in 2025." All right, and, you know what? It did. I mean, it started the year out fantastic. It was on a run, man. Bitcoin did. I think at one point, we were talking, it was up about over 30%. What, it hit about 125, 126,000? I think right around there is where it was. For Bitcoin. Yep. But it's one of those where if you fell asleep at the beginning of the year and you woke up to where we are today, you think, eh, Bitcoin not much going on this year. It's down what, eight, 9%, at least at the time we're doing this episode. But I think at one point it was up over 30, so it's had quite a volatile run this year. I mean, I had to send into self-parody every time I talk about cryptocurrencies. And a lot of it would be the same thing I would say with gold, right? Like where's the expected return proposition there? The fact it could have that much of a run up and decline is probably a good indicator of why it's not a great risk management tool. So I, yeah, similar thoughts on that as gold. Well, it's interesting if you look at the stock market too, I mean, we've got a chart that we've used forever that looks at intrayear gains and declines. You know what I'm talking about? And in a lot of years you see big gains for the stock market and in a lot of years you see big declines for the stock market. And if I'm remembering correctly of the, I think we go back to the seventies on that, about a quarter of the time you see a drop of at least 20% for the year at some point. So, you know, when you start to move into more volatile asset classes, and Bitcoin is more volatile than stocks historically, you kind of should expect some of that stuff. Well, and even this year's up and down doesn't seem to be that large of a intrayear- Relative to what we seen historically. What we seen historically- Yeah, exactly. With Bitcoin there, so. Hey, the only thing I'm gonna mention on Bitcoin early, any cryptocurrency, and we said this before, but it's such a good reminder, just go back to the criteria you wanna think about, the goal, expected return, cost and risk. Always a great way to think about any investment and certainly cryptocurrencies. And that's another episode we did. In fact, I think it's one of the most viewed episodes we've done has been on cryptocurrencies. All right, another one I wanna get into here as we think about markets and then we'll move into a little bit around maybe the economy. "Global stocks are vulnerable in 2025." So a little bit of pessimism there as we entered the year. We got that one wrong. Yeah, this is why, this is one of my favorite parts of the year, not just because we're getting into the holidays, but it's prediction season and you get to see, you know, what were people saying at the beginning of the year, how did it actually pan out. And, you know, we do this exercise every year. This year when we looked across analyst forecast for the S&P 500. All the predictions were positive, which I guess sort of juxtaposes with that pessimistic headline. But, you know, that was a contrast between when we looked at 2024 where actually a good chunk of the analyst predictions were for the S&P 500 to decline during the course of the year. Of course they're way off on that. But even if you look this year, you know, you have predictions that are ranging from like 2% on the low end all the way up to 20% on the high end. The actual return so far has been, you know, around 16%. So most of them were really below whatever the market has done. And that's something we tend to see year after year, which is these predictions or is vast of a range as they are often don't even cover the range of outcomes for the stock market. I like that headline though, in terms of global stocks are vulnerable. I mean, actually, what I hear in that is that maybe risk and return are related, right? I mean, maybe they were vulnerable, right? Maybe there was higher risk, maybe prices were down. I mean there's a lot of different reasons on that. But you know, again, you don't know what's necessarily gonna happen and maybe even in parts of the market where people say, oh, there's, you know, a lot of concern there, maybe you get a really good return because prices might have been pushed down. Lower price, higher expected return. Well, one of the things about all these predictions too is the narrative around the prediction, it always sounds reasonable and fair, you know, based on X, Y and Z I mean that's a great point. Hey, it might make sense that this could happen based on what we're talking about here, but then the market's aware of all those things, right? We were hearing a lot of that a year ago, "Yeah, but I'm really concerned about X, Y, and Z in markets outside the US," but that's already reflected in prices in some degree. And I think your point's a good one, which is, hey, if there's a lot of concerning things out there, prices have probably dropped reflecting those concerns into the future. Well, I like what you said there, and sorry to cut you off there, Wes, but it's just like, I mean, there's all of these people that are looking at this data and they're really well-informed smart individuals, who it's their job to analyze this. And to the point that you made, even analysts that their job is literally just to look at the S&P 500 can't even get close to what it ultimately ends up as. Oh, it's wild. I mean even if you just look over the past four years, the S&P 500 exceeded the best case scenario prediction from analysts three out of those four years. And then in the year where it declined it was worse than the worst case prediction from the analysts, so. You know, and back to your point, you know, I think if you have a less than optimistic view of the world, that's not enough for you to say stocks are gonna go down, because again, if that's what the market in aggregate is predicting, then that's already factored into market prices. And so it has to be the case that the world turns out to be worse than whatever those pessimistic expectations were for the market to actually decline. Well, let's go to individual, we're talking about the market here, let's go to individual stocks and thinking about analysts, right? I mean, it's their job to dig into individual stocks, and how often do we see to where you get the information that actually comes out around earnings and it's very different from what the analysts think? And by the way, it may be different from what you would expect if you got that information. It might be super positive and yet the stock may still go down, 'cause it's about what are the expectations that are baked into the price. You're talking about the returns based on announcement around earnings. Exactly. Right. Nvidia did two years in a row where they released just eye popping earnings numbers for quarterly earnings statements. And their stock price went down. It just happened a few weeks ago again. So yeah, I think that just goes to show, number one, how high the expectations are for those kind of companies. But number two, unless you have a more informed view of the world, of the future than the rest of the market, you're not gonna consistently outcast the market, yeah. All right, you guys wanna dive into some economic variables here? Absolutely. Yes, I would love to. Thank you, Mark. Okay, wonderful. I was hoping you'd answer yes. What would you have done if we said no? I know. Is the episode over? Well, that's too bad. That's what we're doing. There's a new sheriff in town. He can replace us. You know, he's just like I'll get two new youngers in here. Our best performing episodes were when I got replaced anyway, so shoot your shot. So you should be feeling a little pressure here, Wes. Up your game. All right, let's talk recessions. You ready for this one? "Recession is coming before end of 2025." And we heard that narrative quite a bit a year ago and really even throughout the year. So Jake, how do you think about potential recessions? I feel like we've been reading that headline for year. I mean, I really feel like- Literally years. It's coming out all the time. And you do a nice job of sort of looking at how often recessions actually take place. So if you say it enough years in a row, eventually somebody's gonna be right on it. Yeah, I mean, if you say we're gonna have a recession the next two and a half or three years on average, that's going to happen. You just look at the average length of business cycles historically. You know, and it's not that people don't have sort of a view of what's going on with the economy, it's just that in the case of recessions, it's not always the same marker, so to speak, that are used to determine whether we're actually in a recession. You know, people often look at things like GDP growth. Well, GDP growth was flat or even positive in a quarter of US recessions historically. So that's not always, you know, a lock of an indicator of where the economy's going. Plus, once you're already in the recession, normally market prices have reflected that. So if you're a small business owner and you're worried about a recession, yes, that matters. If I had a kid that was graduating college and the whole recession thing like, yeah, 'cause I want 'em to get a job. As an investor, it's kind of a dumb thing to look at because once you're there the prices already reflect that. I mean, we've got some great charts that sort of show when the recession officially starts and when it officially ends. And the market is normally way ahead of both of those dates. It's a great, two comments there. One is it's a great way to separate, is a business owner from an investor too. By the time we found out we are in a recession, the market's moved usually well in advance. In this case usually moved down reflecting, you know, probably the impact on corporate earnings and things you go with the recession. Hey, one other comment there too, it's sort of like you also have to ask yourself as an investor, so what are you gonna do about it? Right? Meaning like, okay, so are we in one or are we not in one, is one coming? Be like, so are you gonna stay invested or are you not gonna stay invested? 'Cause now you're just back to a market timing discussion. We've unpacked that so many times on this show. Now, this one we've gotten countless questions on throughout 2025. "Spooked by trade tensions, global stocks to deliver tempered gains in 2025." So we've talked a little bit about returns to the market outside the US which have been very, very good this year. It sounds like much greater than at least these headlines that were a little concerning. But let's go back to the trade tensions and what we saw with the tariffs and the impact potentially of tariffs throughout the year. I mean, you think about what are some of the top tariff targets and you look at what happened in those markets, you probably would not have wanted to screen out those countries, whether it was Canada, Mexico, China. I mean, these countries were posting pretty stellar returns this year. So it's again, getting back to what is the news that people are reacting to. Well, if it's something that we're all aware of, it's not gonna help you predict which markets are gonna outperform. That's right. I'm gonna say risk and return are related. I wish I just had a button, like I could have like five phrases and just be like, okay, I'm impressed with that one, I'm impressed with that one. Well, nobody would read your headlines and your articles. That's true. Well, actually, I would be a horrible financial journalist. Right? Well, yeah, 'cause you made the point earlier about the level of certainty in these headlines, and you don't get posted in the newspaper or put on TV if you're equivocating in any way. You better be absolutely certain with your remarks for things that are predictions of the future and speculation. It is funny in a lot of the articles though, you sort of get the headline-grabbing statement, but then normally within the article there's a line or two that kind of hedges their bets just a little bit. Well, guess legal and compliance probably made them do that. That's right. Well, sometimes they have some really good points too. Yeah. That, you know, hey, maybe for most investors out there, buy hold strategy can work well. It's just not in the headline oftentimes. I think whether, look, whether I'm reading a journal, whether I'm looking on CNBC, whether I'm scanning the press, I'm doing it because I want information. I like to be informed, an informed investor. Do you like that? Great tie in. Thank you. I appreciate it. That's our show. I know that's why I said it. But I'm not using it to sort of say here I'm gonna dramatically change up my investment strategy. I'm just doing it because I like being educated on the markets and what's going on. Let's go back to Liberation Day though. And then you put some numbers together, Jake, around Liberation Day, those two days around the markets, I think it was the worst two days, sorry, not the worst two days. It was one of the worst two days we've had since 1940? That Thursday/Friday was definitely very, very rough. I mean, I don't have that two-day number in front of me. I think we may have posted it before, but yeah, I mean it was huge. It was one of the biggest two-day declines we've ever seen. And then a couple days later, it was one of the best one days we've ever seen. It was on that Wednesday. Is going back Liberation Day and the concerns about tariffs. But I bring that up to go back to your point, Wes, which was if you look at the impact on tariffs, and we've had a couple different economists, you know, on some different webcasts we've done and they're talking about the impact on those tariffs are far greater to some of our trading partners like Mexico and Canada. Just because the size of our economy can probably absorb that stuff. But let me give you some numbers. You alluded to this earlier, Wes. So these are returns of a couple countries that we heard quite a bit about during that Liberation Day. So these are the returns, year-to-date returns through October of this year. So the US was up about 17% over that time period. China was up 37%. Canada up 29%. Mexico up 46% Germany up 31%. So probably if you would've said or if there was a headline at the beginning of the year said, I'm certain there's going to be some major tariffs proposed, you probably wouldn't expect these kind of returns. All right, let's go into some headlines we get sometimes that drive kinda the emotions around being an investor. So here's one for us as we enter 2025, "How to prepare for a lost decade in stocks." So Jack, Jake. So, Jake- You can call me whatever you want. Give us a little reminder on what lost decade means, and let's connect it to kind of where we were as we started 2025. Go back to 2000, run it through the end of 2009, basically in the S&P 500 you get, I think it's negative 0.9% annualized for that period. So you invested for 10 calendar years and you get a negative return. Now, the thing that whenever that's cited people fail to realize is they don't look at global stocks because actually outside the US in some other parts in the market you did just fine. How do you think about the idea of a lost decade? I mean, emotionally thinking if I lose money over 10 years, that's brutal as an investor. Well, it's a great lesson about not being all in one particular asset class over the long haul because over the same stretch of time, US small cap value stocks returned about 12% annualized. So it's a good argument when you think about, well, you can have global diversification, have emphasis on, you know, stocks with higher expected returns. And that historically has helped in some of these anecdotal periods where one particular asset class like US large cap stocks underperforms. I love to go back and look at like an S&P 500 versus sort of a globally diversified allocation. It's really interesting because, you know, the returns, depending on a time period, may look kind of similar. Standard deviation, may be about the same, maybe the diversified portfolio. But it's that long run where you get a negative return, whereas it, to Wes' point, if you're just in one asset class, you're probably increasing the probability that that may happen. Yep. All right, Wes, you talked a little bit about the experts out there, you know, putting these forecasts together. And again, I just wanna go back there and a lot of these people are very bright, man, they've got tons of data available to 'em, they're making their best, I'll say guests or forecast, they can make based on what they have in front of them. But it's hard because life happens, you know, the future happens, things change unexpectedly or who knows what around that. So it's just really, really difficult to get these predictions, and I think the numbers you bear there show that out. But I guess that's my point there, is just the future's uncertain, so whatever we're reading, some of these headlines, just don't take them too seriously because nobody knows what's gonna be happening a week, a month, certainly 12 months from now. So I wanna read one other headline here as we think through wrapping up some key takeaways. And this is the headline I think is incredibly important. It goes, "You have a 72% chance of making money in stocks in 2025." Okay, that's a pretty precise number. Tell me what you take away from reading that headline. Well, on any of these things, I love when there's just the precision with some of the numbers, but actually I think that headline's pretty spot on. You know, if you , if you look historically about three quarters of the time, you get a positive return to the market, and about one out of four, you get a negative return. So when I hear that headline, I'm like, hmm, I guess they just looked at the historical data. Yeah, we often see what are referred to as capital market assumptions where some managers will release what they expect to be asset class returns. And I mean, they get very granular, like this is what I think US small value is gonna do over the next three to five years. And they attach insanely precise numbers, sometimes to multiple decimal points, and, you know, look, it's not like we have any more of a crystal ball than they do about what's gonna happen in the future. The difference is we don't make asset allocation decisions based on these prognostications because we think they're all pretty much random number generators. I always think back to Anchorman where he says, "60% of the time it works every time." And that's about as useful as I think these numbers are. I just like to ballpark things and then you sort of are hedging your bets, right? But I'm a sales guy, so. Good to know. Well, it's a great headline though. Listen, if you wanna improve your odds of success over time, it's almost like the best chance, the best predictor out there is just being in the market. And historically, we've seen those numbers work out pretty well. Like you said, about three quarters of the time, there's a positive return. One other reminder too is I think if you go and talk to a lot of financial professionals, you know, they'll tell you that if they are putting clients, investors into the stock market, it's probably a little bit longer time period than one year, or quite frankly even four years. So good to keep in mind. And by the way, if you're gonna be a long-term investor, you're probably gonna get some negative years. Yep, yep. Great point there. All right, this is the last one here for the day. And I think it's something to keep in mind as we go into the new year as we start reading a bunch more headlines, a bunch more predictions that we just walked through from a year ago. And again, this is two years old, but I think it's just a great, great, great way to wrap this up. "Wall Street is again making predictions for next year, but don't pay too much attention." So that's the best advice of the day here. Love it. All right, and thanks, everybody, for joining "The Informant Investor." In upcoming episode, we are going to dive into the concept of fire drilling your portfolio, creating proper expectations as we go into the new year, even in time periods when markets have been good. And with that, have a wonderful holiday season. Enjoy time with friends and family, and be safe. Thanks, everybody. Premiumbeat.com