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The end of the year is a time of holiday celebration, introspection, and for Wall Street strategists to predict the market. What I like to stress to my clients is that these analyst forecasts are nothing more than speculation, wishful thinking, and marketing. They should not be considered investment advice.
A more realistic outlook for 2025 is to focus on events that are likely to occur. Being mentally prepared and positioning your portfolio accordingly will help set you up for financial success in the year ahead. Below are predictions of what will likely happen.
1) There will always be bad news: When bad things happen, the media likes to make a big deal about it. After all, negative news attracts far more clicks than positive news. More attention means more advertising revenue. It’s a simple business model. Financial media is no different from traditional news organizations. Talking heads repeat the same bad inflation numbers and stock market declines ad nauseam until they find new negative news to share with their audience.
Investors should remember that despite what’s going on in the world, markets and humanity have always won. Obsessing over every scary headline won’t change that reality. Stay optimistic and life and your portfolio will get better over time. They always are.
2) Major world events that no one could have predicted will occur, such as record high inflation, war, a global pandemic, the collapse of cryptocurrencies, and a global pandemic. A lot of unpredictable things will happen in 2025. As mentioned earlier, these can be negative events. There could also be positive news, such as a strong economy or a record year for the stock market. It’s not an investor’s job to predict these big events. That’s not possible. Instead, investors should focus on building their portfolios to withstand whatever lies ahead and keep their emotions in check. By doing so, investors can achieve long-term financial success.
3) Your know-it-all brother-in-law/friend will have great investment opportunities that you can access. The most common question I receive is whether or not I should participate in an investment opportunity suggested by someone close to me. The answer is “NO” in most cases. Envy and speculation are what keep the world running. This remains the same. In social situations, whether it’s on the golf course or at dinner with friends, it’s common to want to conveniently ignore the losers and share the winners of your investments. These stories make others jealous. It’s important to remember that you don’t need “access” to anything special to achieve your goals. The process should be boring, mundane, and consistent over time. If your strategy represents that level of bluntness, you’re more likely to minimize mistakes and build wealth over time. Don’t try to convince someone who has a favorable deal otherwise.
4) Your know-it-all brother-in-law/friend will tell you what you should do with your personal finances. Remember that personal finance is personal. What may be wise for your brother-in-law may not be relevant to you. The basis of any investment strategy is setting specific goals. Once you define what they are, you can develop strategies to achieve them. Your brother-in-law may have different goals, financial circumstances, or lifestyle preferences than you. These differences may require different strategies. You should look out for your own interests, and your brother-in-law should also look out for his interests. Other people’s strategies usually don’t make sense to you or your family.
5) You can’t pass math. This is one of the timeless rules and always applies. This is the basis for carefully managing your finances, so it’s worth repeating every year. In 2025, if you can’t afford something, you shouldn’t buy it. If you really want to buy it, you will need to remove something else from your lifestyle in order to be able to afford it. Taking on large amounts of debt is never the right approach. For retirees, if your spending rate is too high, you’re more likely to outlive your money. If young people don’t understand this concept, they may never be able to retire. Delayed gratification and discipline aren’t easy, but they are a proven path to financial success.
6) If you plan on making “tactical” moves with your portfolio, there’s a good chance it won’t work out. Tactical portfolio changes are synonymous with trying to time the market. You may get lucky in a short period of time. However, this strategy does not work in the long run. Your portfolio should be structured based on your time horizon, risk tolerance, goals, and personal financial situation. Investment strategists have bragged that 2025 will have a different “investment theme” than 2024, so this thinking should not change. Wall Street strategists are just as ignorant about new year’s investment themes as everyone else. Stay the course and rebalance your portfolio as needed. . More than that is too much.
7) Many of the predictions by Wall Street thought leaders are incorrect, but my advice is spot on. I may seem overconfident, but my job is easier than that of a market strategist. I’m not trying to predict the future fairly accurately. After all, no one can guess how a particular stock or market will perform. Instead, I focused on human behavior that is consistent across time.
Thankfully, the secret to financial success is not a secret and does not require prophetic abilities. The formula for building and maintaining wealth is to spend less than you earn and invest your savings wisely and wisely. If you repeat this process over many decades, you can build a meaningful level of wealth in the future. Everything else is just noise.
However, the most insightful statement on predictions came from baseball player Yogi Berra, who said, “It’s hard to predict, especially about the future.”
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services are provided 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.
