Year-end is a time for holiday cheer, introspection, and Wall Street strategist predictions for the market. As I try to emphasize to my clients, these analyst projections are nothing more than guesses, wishful thinking, and marketing. They should not be viewed as investment advice.
A more practical outlook for 2025 is to focus on events that have a high probability of coming to fruition. Preparing mentally and positioning your portfolio accordingly will help set folks up for financial success in the year-ahead. Below are predictions that will likely occur.
1) There WILL be unpleasant news: When bad things happen, the media loves to drum it up. After all, negativity attracts many more clicks than positive news. More eyeballs mean more ad revenue. It’s a simple business model. The financial media is no different than traditional news outlets. The talking heads will repeat the same bad inflation numbers or stock market declines ad nauseum until there is a fresh piece of negative news they can share with their audience.
Investors should remember that despite what is happening in the world, the markets and humankind have always prevailed. Obsessing over every scary headline will not change that reality. Stay optimistic and, in time, life and your portfolio will get better. They always do.
2) There WILL be major global events that nobody predicted: Record high inflation, war, a global pandemic, the implosion of a cryptocurrency, a global pandemic and so on. There are many things that will take place in 2025 that are unpredictable. These may be negative events, like I just mentioned. It may also be positive news, like a strong economy and a record-setting year in the stock market. It’s not the investor’s job to foresee these big events. That’s impossible. Rather, investors should focus on structuring their portfolio to withstand whatever awaits them and keep their emotions at bay. Doing so will position investors for long-term financial success.
3) Your know-it-all brother-in-law/friend WILL have a great investment opportunity that they can get you access to: The question I receive most is whether someone should participate in an opportunity suggested by someone close to them. The answer is almost always NO. Envy and speculation are two things that keep the world turning. This won’t change. In social settings, whether it’s on the golf course or a dinner with friends, it is common for people to want to share their investment winners, while conveniently leaving out the losers. These stories make others jealous. It’s important to remember that you don’t need “access” to anything special to achieve your goals. Your process should be boring, plain vanilla, and consistent over time. If your strategy represents that level of dullness, then you are likely to minimize your mistakes and build wealth overtime. Don’t let anyone with a hot deal try to convince you otherwise.
4) Your know-it-all brother-in-law/friend WILL tell you what you should be doing with your personal finances: Remember, personal finance is PERSONAL. What may be sensible for your brother-in-law, may not be relevant to you. The cornerstone of any investment strategy is to lay out your specific goals. Once you define what those are, you can develop a strategy to achieve them. Your brother-in-law may have different objectives, financial circumstances, or lifestyle preferences than you. These differences may necessitate a different strategy. You should look out for your own self-interest and your brother-in-law should look out for his. Someone else’s strategy usually does not make sense for you and your family.
5) You will NOT get a pass on math: This is one of those timeless rules that always holds true. It’s worth repeating again every year since it’s foundational to prudently managing your finances. In 2025, if you cannot afford something, then you shouldn’t buy it. If you really want to buy it, then you need to cut something else from your lifestyle to be able to afford it. Taking out loads of debt is never the right approach. For retirees, if your spending rate is too high, you will increase your probability of outliving your money. For younger folks, you may never be able to retire if you can’t appreciate this concept. Delayed gratification and discipline are not easy, but they are the tried-and-true path to financial success.
6) If you plan on making “tactical” moves with your portfolio it will likely NOT work out: Tactical portfolio shifts are synonymous with trying to time the market. You may get lucky over a short period of time. However, this strategy will not work over the long-term. Your portfolio should be structured based on your time horizon, risk tolerance, goals, and personal financial situation. It should not be repositioned because an investment strategist pontified on how 2025 will have different “investment themes” than 2024. Wall Street strategist are just as clueless to the new year’s investment themes as the rest of us Stay the course and rebalance your portfolio when necessary. Anything more than that is too much.
7) Many of the predictions by Wall Street thought leaders will NOT be correct, but my advice will be on point: This may seem overconfident, but my job is easier than a market strategist’s. I am not trying to predict the future with any great degree of accuracy. After all, specific stock or market performance is anyone’s guess. Instead, I focused on human behavior that has been consistent throughout time.
Thankfully, the recipe for financial success is no secret and doesn’t require prophetic abilities. The formula to build and maintain wealth is to spend less than you make and invest your savings in a prudent and sensible manner. If you repeat this process for decades, it will lead to building a meaningful level of wealth in the future. Everything else is just noise.
In the meantime, the most insightful remark regarding predictions came from baseball player Yogi Berra who said: “It’s tough to make predictions, especially about the future.”
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment Advisory Services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. ParkBridge Wealth Management is not affiliated with Kestra IS or Kestra AS. Investor Disclosures: https://www.kestrafinancial.com/disclosures.
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