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2024 was a year of financial surprises for many investors. The S&P 500 (GSPC) index has seen significant growth and is poised to end the year with a 25% return.
Despite high interest rates and rising unemployment, it was a good year for the American economy. But will it remain that way in 2025?
Economists and market strategists recently appeared on Yahoo Finance’s Stocks in Translation podcast to share their thoughts on the stock market, and many offered insights into what investors can expect in the coming year.
Here are the key areas they believe investors should pay attention to.
With President-elect Donald Trump taking office in January, certain aspects of his proposed policies could significantly impact the market’s performance in the coming year.
“I think the risk for the Fed going forward is that they overdo the rate cuts,” warned RSM chief economist Joe Brusuelas. “Given the changing policy matrix out of Washington, especially around tariffs and especially around forced deportations, we could risk a wage-price spiral if we experience a significant contraction in labor supply.”
Brusuelas warned that some industries – particularly construction, manufacturing, retail and leisure – could be constrained in the coming year by the proposed deportation policy, which risks higher inflation and long-term interest rates above 5%.
Read more: How the Fed’s rate cut affects your bank accounts, loans, credit cards and investments
Technology has continued to dominate, with the tech-heavy Nasdaq Composite up more than 30% so far this year. But investors may also want to consider other parts of the market.
Callie Cox, chief market strategist at Ritholtz Wealth Management, reminded investors to “think about balance,” despite calling technology the “superstar of the market” in 2024.
“The market is not just technology; there are other sectors that are cheaper,” she said. “If you see yourself making really good gains in some stocks, maybe think about taking some of those gains and moving into more unloved parts of the market.”
This keeps a portfolio balanced and prioritizes long-term growth, she said, and avoids potential pitfalls if the technology sees some declines in the coming year.
Kristina Hooper, chief global market strategist at Invesco, noted that stocks “expect an economic reacceleration next year.”
This could be good news for small- and mid-cap investments, as she predicts they could see significant growth in the coming year.