It’s forecasting time around the investment industry, and last year I took a stab at predicting what would happen to markets and the economy in 2024. I’ll recap those below and lay out my 2025 forecasts.
Like last year, I’ll qualify each prediction with whether I think it's Mainstream (if its widely held), Balanced (if its somewhere in the middle) and Bold (if its contrarian).
First a couple important caveats we have to get out of the way:
This is my personal opinion, and not reflective of anyone else at WJ, or WJ itself.
We don’t make investment decisions off of short-term predictions, and you shouldn’t either.
Reviewing 2024 Predictions: A Year in Hindsight
Below is a summary of my predictions and the result, however you can read my original rationale for each here.
| Prediction | Result and Explanation |
| 2.5% Inflation (2.9% in 1st half, 2.4% by the back half) | This was almost exactly right. By June, CPI was under 3%, and in September it was 2.4%. Its crept up to 2.7% since then, but I’d count it as a win. There was plenty of debate around this one, so it wasn’t a slam dunk. |
| 2.5% GDP Growth | We’re still waiting on Q4 data, but this is going to be very close as well. 1st 3 quarters were 1.6%, 3%, and 3.1% |
| Interest Rates Won’t Change Much | This was roughly right. The 10-year treasury yield went up a little over half a %, while the 2-year was nearly unchanged. I did predict a mid-year bond rally to the mid 3% range, which did occur in Q3. Overall, rates ended a little higher than I expected. |
| Mortgage Rates near 5% | I should’ve stuck to consensus on this one. Mortgage rates did start to come down to around 6% in Q3, but quickly rebounded back towards 7% after the Fed’s first cut (counterintuitively). |
| Bonds Will Earn Their Yield | It depends on the type of bond. Credit did a little better than its starting yield, treasuries did worse. The index was up about 1.5%, which was worse than I was expecting, but not dramatic. |
| Good Year for Stocks and Current Winners Keep Winning | A good prediction. Stocks followed a strong 2023 with another great year and was even more reliant on the top stocks than I considered when I made the prediction. |
| Home Prices Strongly Increase | We’re still waiting for Q4 data, but for the 12 months ending Sept 30th, the FHFA home price index rose 4.3% and the Case-Shiller house price index was up 3.6%. That’s solid, but I was expecting something more dramatic with the falling mortgage rates predicted before. |
| Apartment Rents Fall | The Apartment List National Rent Report showed a year over year decline in national rents of .6%. Some other indexes show modest increases of around 1% or so. It depends on the region. Still, I expected something a little more dramatic here. |
| Bitcoin to $50k | I felt pretty good about this in September, as btc was a little over $50k. Then leading to and after the election, btc jumped on hopes that Trump would be friendlier to crypto, and now sits around $100k. I still feel like I had the read right on this one, as the “halving” and ETF narrative that started the year only got btc to around the $50k mark. What I didn’t anticipate was the Trump effect on bitcoin's price. |
| Biden Wins Presidential Election | And speaking of Trump, I got this one wrong. I chuckled looking back at the original prediction, because I started it with, “Barring additional legal issues for Trump, or Biden withdrawing from the race…” Over qualifying a prediction is a good way to keep yourself from being “wrong”. The rationale for a Biden victory was that incumbents historically have an advantage, and the economy was good. When I saw that debate in July, however, I wanted a mulligan on this one. |
I’d say that’s 3 right, 4 in the ballpark, and 3 wrong. Probably what you’d expect.
2025 Economic Predictions
I’ll say right off the bat that I feel less confident looking ahead than I did last year. I’m not sure if that means I’ll do better or worse, but here goes anyway.
Inflation lower than today (Bold): This is not consensus, and I’m a little insecure about this prediction. I think the natural path of inflation is down. I don’t foresee any stress on energy prices, I think housing inflation will continue its downward trajectory, and I think employment has softened enough that there won’t be any major wage inflation issues. The HUGE caveat to all this is Trump’s major policy goals of deportation, and broad tariffs. Both are expected to be inflationary, and I also think they are inflationary. My belief is that the actual policies that get implemented will be watered down versions of what was initially expected (as is typically the case) and will have only a modest impact on overall inflation. If there are mass deportations, and blanket tariffs, this will be wrong.
Similar GDP Growth, No recession (Mainstream): Last prediction I specified 2.5%, but to me that’s no different than 2 or 3%, so I’m just going to say roughly average or “good” GDP growth. Picking the average isn’t bold, but just reflects that I don’t expect an outsized positive or negative outcome. Barring some external shock (pandemic, war, etc.), I think it takes longer than a year to go from a strong consumer to a recession, so I put recession odds very low. Where I could see a surprise is to the upside, whether it’s from deregulation from Trump, continued productivity growth from AI and other technology, or increased manufacturing from tariffs and the existing infrastructure bills.
Interest Rates Down (Bold): The trouble with some of these predictions is they are tied together. You get one right, you get them all, and vice versa. Interest rates generally follow both inflation and growth, the two previous predictions. My prediction of slightly lower inflation, and solid growth somewhat offset, which would suggest no change. However, I think markets are pricing in more aggressive policies from Trump than will ultimately come to pass, and as a result I think longer term rates will fall. Trump has also said he wants the Fed to lower interest rates more aggressively. I don’t know if there’s anything he can actually do about it, as the Fed is technically independent, but the Fed’s people are also human and political pressure is real.
Mortgage Rates down and Home Prices up moderately (Balanced): I’m combining these this year since I view them as the same bet. The prediction is similar to last year's, though I’m weakening the language on both since I feel less sure today than last year. I’ve been surprised at how long the housing market has been shut down. If the overall level and volatility of interest rates comes down as I expect, mortgage rates should come down with it. The part I have more conviction in is that if mortgage rates come down, it’ll lead to a bull market in housing and not vice versa. There’s some debate around that last point.
Bonds Do Better Than Their Yield (Bold): This is out of consensus as well, and the conversation hinges on what inflation does. Given I think interest rates will come down, bonds should add price appreciation to their yield.
Below average year for stocks, with new winners (Bold): It’s hard not to like stocks right now. For US large stocks, we have a pro-business president taking office and some very exciting companies growing earnings hand over fist. The only issue is… everyone agrees on that. Last year I felt there were some stubborn bears waiting for inflation or unemployment to surge and bring the market down with it. This year, I don’t see them. That tells me a lot of good news is priced in.
Every other stock category (Small US or International Stocks) looks terrible and has fallen dramatically since Trump won the election. I think a lot of bad news is priced into those stocks. So, in contrast to last year when I predicted that what worked before will keep working, I’m betting on a change in leadership this year.
Bitcoin Crashes (Balanced): If you want to talk about good news priced in, look no further than bitcoin. It’s had a ton of money poured into it via the new ETFs, it has its pro-crypto president who has toyed with the idea of creating a “Strategic Bitcoin Reserve” for the US, it’s taken in an incredible amount of money via MicroStrategy, and the likely incoming SEC Chairman is likely to be more friendly to crypto as well. As a result of all this good news, it went from ~$50k-$110k in the back half of last year. I’m betting it gives back a lot of that this year.
If you really want to speculate in crypto, “invest” in FartCoin, a real coin that recently surpassed a valuation of $1.5 billion, larger than Tripadvisor. (Please don’t do this)
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